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Defending Consumers’ Choices: Cap-and-Trade Will Raise Their Costs and Limit Their Fuel Menu

Clearly the summer of 2009 will be one remembered not for its blistering temperatures, but for the heated debate over consumer choice — the right for Americans to decide for themselves the role their government should play in the marketplace. Without a doubt, health care reform has been the talk of the town hall, but another equally controversial discussion involving consumer choice is only a few more blocks down Main Street.[IMGCAP(1)]Recall a narrow vote in the House of Representatives one Friday evening last June to institute a federal cap-and-trade carbon dioxide regulation on the American economy, an economy still suffering the pains of a severe recession and unemployment levels not seen since the early 1980s. So controversial — and politically critical for House leaders — was this vote that, at the behest of the Speaker, debate was suspended for two hours and the vote delayed so additional special deals could be made with undecided Members inside the Capitol Cloakrooms to gain their support. Despite limited transparency throughout the legislative process, a bill bearing tremendous, adverse implications for the direction of our national economy and energy future was eventually sent to the Senate for consideration. And consumers swiftly reacted.“While we sit on some of the world’s largest oil, natural gas, coal and oil shale reserve, the cost of our energy for everything from gas, electricity and heating oil to bus and airline travel, etc., will go up. All of the extra cost associated with this tax will be passed on to consumers,— wrote a Virginian in the Roanoke Times. “This Waxman-Markey bill claims to go after big energy consumers and polluters, but it will ultimately place the burden on consumers resulting in higher prices across the board. Low-income and middle-class working Americans will be adversely affected by this legislation as they see steep price increases in filling their gas tanks, heating their homes and buying groceries,— another irate reader wrote in the Seattle Times. Other letters were even more impassioned. Informed Americans representing wide geographical diversity understand the consequences of such misguided policies and their inherent costs. They recognize that what’s bad for business is ultimately bad for them — consumers.While some House Members may feel buyers’ remorse after casting their votes and getting an earful from their constituents, the Senate is expected soon to debate its own recently introduced version of cap-and-trade legislation. The Kerry-Boxer bill is no better than its House companion and is even more controversial given its unrealistic targets and implementaion timetable, Moving into what promises to be a heated election cycle, Senators will be faced with a hard decision — give in to the whims of anti-energy proponents and risk our nation’s economic recovery, or sit down and collectively work in a transparent, bipartisan and intellectually honest fashion to craft a realistic energy policy that will achieve our desired environmental objectives without increasing consumer costs, shuttering domestic manufacturing or threatening domestic energy production. Cap-and-trade would force an increase in refined product imports by imposing such costs and onerous regulations on American refineries that they could ultimately close simply to comply with the law. Domestic refiners already face stiff competition from foreign refiners in U.S. markets. Cap-and-trade would only eliminate that competition in favor of foreign producers.And some of the alternatives to cap-and-trade are no better. California and Oregon, for example, are implementing low-carbon fuel standards, an innocuous or even desirable term, which in reality present negative implications for our national fuel supply. First, one could legitimately ask if the Golden State, in the midst of its own severe economic problems and budget shortfalls, should really be cast as a golden example for national policy. The reality is that an LCFS would severely restrict our ability to use oil products from Canada, which is the largest supplier of petroleum imports to the United States. In fact, an LCFS would favor the lighter crude found mainly in the Middle East over the heavier product indigenous to Canada. Implementing an LCFS would only weaken our national security and limit the slate of fuels from which consumers can choose. A senior representative from a United Steelworkers chapter in Minnesota writes, “[t]his Canadian crude oil is the stuff that gives us our jobs, our competitive advantage in the marketplace and the stuff that gives Minnesotans the ability to use their cars, trucks, buses, jet planes and trains in a manner they so choose. It may be imported, but it is from a source that is stable and friendly and affordable.— An LCFS would increase consumers’ costs and reliance on oil products from unstable regions of the world as much as cap-and-trade would. The menu of low-carbon fuels or additives is limited. Corn-based ethanol has its own greenhouse gas challenges, to say nothing of its impact on food supply and cost. Cellulosic ethanol is not available in commercial quantities, nor will it be in any timely manner, despite a federal government mandate for its use.In 1993, the House narrowly passed a British thermal unit energy tax, which the Senate, recognizing it for the political hot potato it was the year before critical midterm elections, wisely declined to consider. We hope, for the sake of American energy employees and consumers alike, that history will repeat itself and the Senate will move on to more pressing matters for the better of our economy and national energy security.Charles Drevna is president of the National Petrochemical & Refiners Association.

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