California cap and trade plan a warning for Oregon

by Sen. Doug Whitsett

Carbon taxes: redistribution of wealth from the private sector to government coffers – unmatched by any previous government scheme for raising taxes.

The California Assembly enacted its “Global Warming Solutions Act”, in 2006. The law mandates that California must reduce its greenhouse gas emissions to 1990 levels by 2020. The expanding supply of inexpensive natural gas has already reduced our national carbon footprint by 12 percent since 2005. Carbon dioxide emissions are the lowest they have been since 1994 according to the Energy Information Administration, the statistical arm of the U.S. Energy Department.

However, that sharp downward trend in greenhouse gas emissions has not deterred the Assembly. They have not altered the authority they handed to the California Air Resources Board. That mandate gave the Board virtual “Carte blanc” to create a carbon cap and trade program by administrative rule. It authorized the Board to define the scope of the perceived problem, to create a plan to address that perception, to write rules and regulations to implement the plan, and to create enforcement mechanisms to compel compliance with its goals.

The Board devised a carbon cap and trade plan requiring California, the state with the world’s sixth largest economy and the second largest rate of greenhouse gas emissions in the United States, to curb its emissions by nearly 30 percent. The stated purpose of the Board’s strategy is to roll-back, and cap the amount of future greenhouse gas emissions, to the amount that was being emitted in California in 1990.This will be accomplished by restricting the number of emission permits sold at public auction to only authorize the amount of emissions that were produced in California in 1990.

The cap and trade regulations created by the Board phases-in restrictions on emissions from refineries, power plants, industrial facilities and transportation fuels. A greater part of California’s fossil fuel driven economy will be regulated with each passing year.

About 90 percent of the permits have been issued without cost since their inception in 2012. For that reason, the total revenue from the State’s public auction of emission permits has been limited to about $1.5 billion.

All that is about to change.

Next year, the carbon cap will be applied to fuel suppliers that account for about 40 percent of the State’s greenhouse gas emissions. Soon thereafter, the caps will be applied to fossil fuels used to generated electricity and to transportation fuels.

California’s economy will be subjected to “death by a thousand cuts”.

The number of carbon credit permits is limited, capped at the 1990 amount of greenhouse gas emission. Their auction price must increase significantly as the artificial, regulation-driven demand increases as the state economy grows.

Most transportation, utility, and industrial businesses will be required to purchase ever more expensive permits, for the privilege of continuing to serve Californians. The Assembly’s financial analysts predict that carbon cap and trade may extract a total of as much as $45 billion from California’s private sector economy by 2020.

In order to remain fiscally viable, businesses must pass their costs on to their customers. Carbon cap and trade alone is expected to drive fuel prices up by as much as 40 cents per gallon.

These estimates do not include the effects of the California “low carbon fuel standard” that will become effective next year. Respected national economists predict that the combined effect of these two California laws may drive retail fuel prices up by as much as $1.80 per gallon.

California law requires all state revenue, collected from the sale of carbon cap and trade permits, to be spent on programs to reduce greenhouse gas emissions. Notwithstanding that law, last year California state government diverted virtually all of the cap and trade income to the California general fund, to be used for general state budget purposes.

This year, the California Senate President has introduced plans for using virtually all of the future cap and trade revenue. His plan will spend 40 percent of the cash bonanza for affordable urban housing, 30 percent for mass transit, 20 percent for high speed rail, and 10 percent for roads and bike paths. Environmental activists, and electric car producers, want to amend and enlarge his plan to authorize spending up to 400 million additional dollars for the deployment of electric cars and other clean vehicles.

Make no mistake. These programs have very little to do with environmental concerns. They are created, and enforced, to provide for the redistribution of income. Both the California carbon cap and trade plan, and its low carbon fuel standard, are really about raising huge sums of money, to spend on California government, and to fund the various pet projects of legislative leaders and political donors.

Governor John Kitzhaber continues to follow the lead of California Governor Jerry Brown and President Obama. He is the visible and vocal leader in the promotion of both a low carbon fuel standard and various forms of carbon cap and trade for Oregon.

He is using similar state executive power to the federal mandates used by the President. Obama has issued executive orders to mandate federal action by the Environmental Protection Agency; thereby, bypassing Congressional authority.

The Oregon Legislature has twice wisely declined to extend authority to create an Oregon low carbon fuel standard. Last February, Kitzhaber issued an order to the Oregon Department of Environmental Quality intended to create and implement an Oregon low carbon fuel standard by executive fiat; thereby, circumventing the Oregon Legislature. His action handed administrative authority to the Department of Environmental Quality to effectively create a “green” fuel tax to raise funds for renewable energy programs.

Where have we heard that before? We need only to look across our southern border to learn how much economic harm these programs create, how they are actually intended to raise funds for different purposes, and to understand who actually benefits from their creation.

Our state and nation depend on carbon based fuels to power 82 percent of our economies, according to the U.S. Energy Information Administration. Both the low carbon fuel standard and carbon cap and trade permits serve to tax the use of carbon based fuels.

There is virtually no limit to the potential future growth of state and federal government fueled by the enormous amount of money generated from these carbon taxes. They are designed and created to expand the rate of taxation as the economy grows.

They will have the effect of taxing virtually everything we do every day of our lives. The redistribution of wealth from the private sector to the government coffers will be unmatched by any previous government scheme for raising taxes.

Oregon voters would do well to pay attention to our southern neighbor. We should avoid the economic poison that both of those schemes are currently inflicting on the people of California.

Senator Doug Whitsett is the Republican state senator representing Senate District 28 – Klamath Falls