By Don G. Briggs, President – LOGA (Louisiana Oil & Gas Association)

“So I ask this Congress to send me legislation that places a market-based cap on carbon pollution and drives the production of more renewable energy in America. That is what we need.” President Barack Obama during his first address to Congress.

The Cap and Trade Tax and why we should care.

We have been hearing about Cap and Trade since 1990 when a similar program was enacted by the Clean Air Act to reduce sulfur emissions that caused acid rain. The Cap and Trade we are now hearing about has the goal of reducing carbon emissions and therefore, slowing or stopping, global warming. The debate on whether global warming is the cause of carbon emission is another story.

The program works by limiting how much carbon a company can produce: The Cap. The emitter would have to have a permit for every ton of carbon dioxide (CO2) they emit. As time passes, the government would reduce the number of permits available, thereby forcing the companies to reduce emissions. Some companies will not emit their allowance of CO2 because of better procedures or reduced activity. These companies will then be issued Carbon Credits. The companies with Carbon Credits will then be able to sell these credits to companies that emit larger amounts of CO2: The Trade.

Warren Buffet, a staunch supporter of President Obama, does not agree with the Democratic party on this issue: “Anything you put in that effectively taxes carbon emissions is – somebody’s going to bear the brunt of it…. that tax is probably going to be pretty regressive.”

The President’s FY 2010 budget includes revenues from Cap and Trade totaling over $650 billion, which is a very conservative estimate. The Congressional Budget Office (CBO) estimates that revenues will be closer to $900 billion. Peter Orzag, the President’s Budget Director, said that he was “sure there will be enough there to finance the things that we have identified” and maybe “additional money” too. (source WSJ). It appears that even the White House agrees that the $650 billion is a conservative number.

Where is this $650 billion or more going to come from? The answer, Louisiana and other industry heavy states: Louisiana ranks 6th in per capita CO2 emissions, California 47th. We have 19 refineries and dozens of chemical plants throughout Louisiana; they will be hit the hardest. It appears that the spread-the-wealth program not only applies to income levels of families, but also where you live.

The problem is that companies are not going to just absorb $650 billion in new costs. Those costs are going to be passed directly on to the US consumer. The largest increase will come in the form of your electricity bill. Fortunately, the Congressional Budget Office has crunched the numbers for us. The lowest 20% of income earners would see an increase in out-of-pocket expenses of about $680/year. The middle 60% would see an increase of about $900-$1500/year, hardly the-no tax increases the President has promised 95% of Americans.

The companies that choose not to pass on the cost to the consumer will likely just pack up and move to Brazil or China. These countries are starving for the manufacturing and refining industries that we are driving away.

The cost of President Obama’s “cap & trade” tax combined with the estimated $31 billion tax on the American natural gas and oil industry will have dire consequences on Louisiana’s oil and gas, petro chemical, and refining industries. The policy of taxing your way into prosperity is a policy doomed for failure