Cap-trade no bargain for Pennsylvania

Thursday, July 02, 2009

On June 26, the House narrowly passed a massive energy tax. I voted against this 1,300-plus-page bill, H.R. 2454, commonly referred to as cap-and-trade legislation, as did 44 Democrats (including four from Pennsylvania) and all but eight Republicans. I believe it will negatively impact every component of our nation's economy.

Under the bill, the amount of carbon emissions allowed in the U.S. would be capped and companies that generate greenhouse gases would be required to obtain permits for their emissions. If you emit more carbon than the cap allows, you pay a hefty tax.

Perhaps no other sector of our economy would be affected as deeply under this system as the utility industry and its residential and business customers. In Pennsylvania, 56 percent of the electricity we consume comes from coal-fired plants. We are the nation's third-largest consumer of coal and the fourth-largest producer. Coal cannot be replaced quickly or inexpensively. Because of Pennsylvania's reliance on coal, the price of electricity in our state would increase dramatically under a cap-and-trade regime as the federal government deliberately drives up the cost to produce energy from fossil fuels as a means to curb carbon emissions. With rate caps set to expire across the state, families can ill-afford any additional increases in electric bills. Rates will increase substantially, in addition to what is projected with rate caps expiring in 2010.

Beyond homeowners, this policy will have serious reverberations on energy-intensive industries in our region that depend on reliable and affordable supplies of power to keep pace with increasingly competitive foreign producers. This legislation will compel some manufacturers to shift production to facilities located in nations without cap-and-trade policies (including China and India) to avoid increased costs, leading to domestic job losses. Additionally, this shift will have a negative impact on reducing carbon emissions, as most production will be relocated to countries without commensurate environmental standards, an effect commonly referred to as "carbon leakage."

Not surprisingly, the authors (Reps. Henry Waxman of California and Ed Markey of Massachusetts) and most vocal supporters in Congress are from regions of the country that will be the least impacted under the new system (primarily the West Coast and New England). Cap-and-trade is naturally more palatable in areas where utility bills will marginally increase and few blue collar jobs will be put at risk. States such as Pennsylvania will be disproportionately impacted by a massive transfer of wealth from the industrial and agricultural heartland to coastal states.

I raised these concerns during the floor debate, and I wasn't alone. In a letter to Congressional officials, members of the Pennsylvania Utility Commission, which oversees the energy industry, voiced serious concerns over the "staggering" cost. They explained, "if the Waxman-Markey bill were to pass, Pennsylvania is looking at a bleak scenario by 2020: a net loss of as many as 60,000 jobs, a sizeable hike in the electric bills of residential customers, an increase in natural gas prices and a significant downward pressure on our gross state product."

Hopefully, this legislation will be rejected by the Senate. Then perhaps we can begin work on a sensible, comprehensive policy that advances traditional, alternative and renewable energy sources. While reducing carbon levels is important, we must do so in a manner that encourages the continued development of our dynamic and powerful economy, not one that restricts it. We need an approach that includes short-term and long-term strategies.

In the short-term, Congress must adopt policy that encourages the American industrial sector and scientific community to develop cleaner technologies while recognizing the current needs and capabilities of the domestic economy. The reality is we are not technologically prepared to abandon carbon-based fuels for alternative energy sources without experiencing significant economic pain.

In the long-term, we must expand nuclear energy production and support clean energy technologies in every application possible including agriculture production, electricity generation, manufacturing, transportation and consumer goods. This will allow our economy to end its carbon reliance in a responsible, yet progressive way that does not impose unnecessary hardship on the American people.

U.S. Rep. Charlie Dent, a Republican, represents Pennsylvania's 15th District, including all or parts of Lehigh, Northampton, Montgomery and Berks counties. He lives in Allentown.

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