Opinions are varied on what purpose cap and trade legislation will ultimately serve, or if it will have a real impact on either the global environment or atmospheric conditions. And that’s without delving into the scientific debate over manmade global warming.

The one thing most everyone can agree on is that it will have a direct impact on future energy production in America and, as a result, energy costs for consumers.

Dan Blesi, CEO and general manager for Crawford Electric Cooperative, said utility customers both at the local cooperative and elsewhere across the state can expect their bills to go higher if and when cap and trade legislation is signed into law. “It’s not a matter of if” electric bills will go up, he warned. “It’s a matter of how much. This legislation will cause multiple rate increases for consumers over the next few years. Now, how much those rate increases will be and how often? That’s impossible for me to say, but the reality is that cap and trade will affect how we do business in the future—and that will affect the members (of the cooperative).”

Blesi explained that Crawford Electric has joined with a number of other electric cooperatives nationwide in a lobbying effort not to stop cap and trade but to better shape its final version. “The decisions being made in Washington now are going to affect the future of energy production and consumption in this country, so we’re interested in having a say in how those decisions are made,” he said. “The key thing is we want this legislation to be fair—so that different states from all parts of the country are on a level playing field when it comes to placing restrictions on carbon dioxide emissions. Also, we want to be certain that the timelines for CO2 reduction are realistic and far enough into the future that it gives us time to develop the technology to move toward greener energy sources.”

The theory behind CO2 cap and trade is to limit (or “cap”) the amount of greenhouse gases emitted by manufacturing companies and lower that cap over time, allowing less and less pollution until reduction goals have been met. Companies emitting pollutants must hold government allowances and emission permits to cover the amount of CO2 they expel into the atmosphere up to the cap. To reduce pollution, the number of allowances is reduced each year.

Unused allowances may be traded, rewarding greener companies that find ways to reduce gas emissions by giving them the option of selling their unneeded allowances on the open market to other companies emitting greater pollution levels.

The Environmental Protection Agency claims on its website that cap and trade is a market-based approach to addressing environmental quality that has been proven to work with the Acid Rain Cap and Trade Program of the 1990s. “This flexibility lets businesses determine the cheapest way to reduce emissions while government determines the overall emission cap at a level that guarantees air quality and that environmental goals are met,” the EPA reports.

Others say a new cap and trade program will destroy the nation’s manufacturing sector and send even more jobs overseas to countries where there are no environmental restrictions and cheaper labor costs. The Wall Street Journal’s op-ed page recently likened cap and trade legislation to “the biggest tax in American history” and stated “the whole point of cap and trade is to hike the price of electricity and gas so that Americans will use less. These higher prices will show up not just in electricity bills or at the gas station but in every manufactured good, from food to cars.”

Missouri Farm Bureau has also come out against cap and trade, saying it will be bad for Missouri and bad for farmers because of the de facto tax it places on fossil fuels such as coal and oil. Charles Kruse, president of Missouri Farm Bureau, called the legislation “one of the largest transfers of personal earnings into government coffers” in American history. He estimated that farmers will lose net income of at least $5 billion by 2020 because of the increases in fuel, fertilizer and other input costs. Higher input prices are expected to far outweigh any potential benefits farmers might have in trading carbon credits on the open market.

In Europe, where the European Union adopted its own version of cap and trade in 2005—the Emission Trading Scheme—in the first phase of the greenhouse gas capping system, the price of electricity more than tripled. However, other factors, such as oil prices, can also be blamed for those rising electric costs.

Blesi explained the cooperative is not a part of the fight against cap and trade, because he thinks stopping the legislation altogether is highly unlikely at this point. He just wants to see rural electric cooperatives and the Midwestern states where manufacturing is still a key sector of the economy included in the shaping of new legislation.

“Cap and trade is nothing new. We’ve known for several years that this was coming. It was just a matter of when,” Blesi stated. “The consensus is that this (legislation) is going to happen, so we can stand back and throw rocks at it and hope for the best, or we can take an active part in the debate. We want to make sure we're part of the mix and fighting for our rural members to have our voices heard. There were some major problems with the original version of the House bill. We could foresee lights going out in some of our rural members’ homes if that bill were to pass. Luckily, there were some key changes made before the final House version was voted on, and our lobbying efforts had some impact. But there’s still work to be done.”

The National Rural Electric Cooperative Association, representing over 900 electric cooperatives in the nation, serves as the industry’s key lobbying arm in Washington, DC. The NRECA played an instrumental role in affecting the House legislation to better reflect what Blesi described as a “more fair and equitable bill,” one that doesn’t punish states in the Midwest who have a larger manufacturing sector and rely more on coal and natural gas for generating electric power.

“All the Midwestern states are in same boat,” he said. “The Midwest is coal-fired. We use coal and natural gas to generate our electricity. What manufacturing is still left in this country is primarily found in the Midwest, due to our lower electric rates. If this bill comes out with the Midwest bearing the brunt of (higher costs) and we double or triple our rates over the next 20 years, there will be no manufacturing jobs left in the Midwest. They’ll all be gone—and probably overseas.”

The NRECA is fighting for a better system of distributing CO2 allowances based on actual emissions, rather than company size or total dollars of sales. It also seeks to make certain that profits from the sale of carbon credits go directly toward investment in green technologies and renewable energy sources, rather than back to the federal government.

“When this process got started, it was really just a way of generating more revenue for the federal government’s programs,” explained Blesi. “My question is: If you’re going to have to pay $20 more per month as a member (for electric), what do you want it to go toward? Cleaner energy and a better environment, or the politicians in Washington? And that’s the key issue for us—how these dollars are going to be spent.”

Garrett Hawkins, Director of National Legislative Programs for Missouri Farm Bureau, said cleaner energy sources cannot be achieved in America overnight. It’ll take time and cap and trade is not the answer to a cleaner environment.

“If this is about clean energy, then why don’t we have a comprehensive energy plan put together as part of this bill?” he asked. “Cap and trade creates a huge energy hole in the short term. Yes, we need alternative energy sources and renewables in this country, but we also need more domestic oil drilling, more electric power plants, more nuclear plants—more American energy, period. Philosophically speaking, the Farm Bureau does not believe that the heavy hand of government is the way to spur new technologies in energy production. If Washington was being serious about energy independence, then we they would be doing more in this bill to produce our own energy. Cap and trade is about generating dollars for the federal government, not answers to our energy or environmental problems.”

The Senate will begin debate in committee on the House bill when Congress reconvenes for the fall legislative session.

The Cap and Trade Argument

Federal cap and trade legislation is meant to steadily reduce carbon dioxide and other greenhouse gas emissions. A successful cap and trade program would limit the rise in global temperature to approximately 3.6 degrees Fahrenheit above pre-industrial levels by 2050.

Proponents say cap and trade provides a market-based solution to the global warming problem while also pushing for conservation, greener technologies and alternative energy sources. Revenues generated from the auction of carbon permits would be “recycled” back into the economy to facilitate transition toward a low-carbon energy economy and ensure that consumers are not burdened with higher energy costs.

Opponents of cap and trade believe that the current bill will have little or no impact on the earth’s atmosphere, puts the nation at a competitive disadvantage in the world marketplace because it cannot require other countries to reduce their greenhouse gas emissions, and imposes higher costs on all sectors of the economy by driving up carbon-based energy prices, such as oil, coal and natural gas.