We Need a Mexican Standoff on Cap and Trade

We Need a Mexican Standoff on Cap and Trade

August 02, 2010
Originally published in The American Spectator

Despite claims to the contrary, the energy tax known as cap and trade is still alive. Although Senate Majority Leader Harry Reid has supposedly pulled the plug on it, our implacable Senatorial leadership is reportedly conspiring to foist the Kerry-Lieberman bill on the American people by bringing it to a vote during the lame duck session. They would then reinstate the cap and trade provision during conference with the House's Waxman-Markey Bill. This scheme would not only impose huge new taxes on the American people, it could also transfer billions of dollars and many thousands of jobs to Mexico.

The first reason for timing the vote after the election should be obvious. The Democrats hope that retiring Republican Senators George Voinovich (OH), George LeMieux (FL), and Judd Gregg (NH), who have voiced support for climate legislation in the past and will no longer need to worry about responding to their constituents, will buck the party line in order to cement their respective "legacies" in the eyes of the media and liberal historians. Asked about this possibility, White House spokesman Robert Gibbs said he "certainly wouldn't rule it out." This threat must be taken seriously.

Most Americans understand that cap and trade would mean skyrocketing energy costs -- as the President himself admitted during his election campaign -- but that's not all. Cap and trade would carry serious geopolitical ramifications for the United States.

During the lame duck session, President Obama will likely travel to Cancun, not on vacation, but to attend a global climate summit. At this follow-up to the failed Copenhagen summit, the international environmental establishment will hope to revive negotiations for a successor to the Kyoto Protocol. The U.S. will face pressure not only to cap its own emissions, but to provide aid to developing countries like Mexico to help them develop their own "green" energy industries and build new, "clean" industrial capacity -- the better to out-compete America's newly energy-taxed industries. The EU has already pledged €7.3 billion ($9.92 billion) in "climate aid" to poor countries over the next three years (although much of this is repurposed general aid).

Where would America find the money to send this aid abroad? Much of the money would likely come from the sale of carbon permits to American businesses, the cost of which will mostly be passed on to consumers. Developing countries are demanding this as part of any successor to Kyoto, which expires in 2012. However, they are also demanding that developing countries -- including major emerging economies like Mexico, Brazil, and China -- be exempted from having to reduce their own emissions, at least in the short term.

In other words, Kyoto II would be a ratchet, aimed at squeezing money from the developed world and sending it to the developing nations. Entire industries would be so badly affected by the carbon caps that they would move lock, stock, and barrel to developing countries, so the flow of cash would soon turn into a flow of cash and jobs. Meanwhile, developed countries, facing huge job losses, would face a much harder time raising the money to fund the flow of cash. As a result, the promises of climate aid would be even harder to keep as the developed world sinks into an artificial recession, caused by our own climate guilt.

The sad reality is that this utopian scheme would not even result in global emissions reductions, because industries will relocate to where they would need to make no appreciable cuts in emissions. For Mexico, this, combined with its proximity to the United States, would mean a huge boon to its industrial capacity as many American firms relocate facilities there.

President Obama likely will be feted by both the Hollywood glitterati and the Mexican people if he brings this stimulus for the Mexican economy to Cancun. The American people should be wary of such generosity with their money. If ever we needed a "Mexican standoff" on a Senate measure, this is it.