Capitol Comment: Cap and Trade - A Job Killer for Texas

By U.S. Sen. Kay Bailey Hutchison | Aug 27, 2009

As the summer winds down and the fall picks up, the Senate will return to a legislative agenda marked with more massive and misguided proposals being pushed by the Administration and Democratic Leadership.

One that all Texans should pay close attention to is "Cap and Trade" legislation. The proposal could level a deeper impact on our state's economy and the financial well-being of Texas families than any bill in recent memory.

The concept of Cap and Trade is based on the idea that total national emissions are capped at a predetermined amount, thereby limiting the amount of greenhouse gases that companies can emit. Emitting companies are provided a set of allowances on an annual basis for every ton of carbon dioxide they plan to release into the atmosphere.

Over time, the total greenhouse gas emissions allowed are reduced until the ultimate pollution-reduction goal is met. Businesses whose emissions will exceed their cap in any given year must purchase emission allowances from those who are releasing less carbon and are not utilizing their full allotment.

I am concerned about the impact this bill would have on Texas, which would be disproportionately affected by Cap and Trade legislation because it is an energy and manufacturing state. In fact, Texas provides the nation with more energy than any other state. It is the leading crude oil-producing state in the nation, as well as the leading natural gas producer. Texas's 26 petroleum refineries account for more than one-fourth of all U.S. refining capacity.

Because energy and manufacturing is prevalent in Texas, we have a disproportionately high level of greenhouse gas emissions compared to states that utilize our energy production rather than producing their own. By its nature, the cap and trade system is designed to raise the cost of conventional energy by requiring emission allowances for its usage.

When manufacturers face excessive costs for the right to produce their goods (i.e. run their plants), they will have to pass those costs down to consumers. Every time a consumer switches on a light, turns on the air conditioner, or runs a load of dishes, he will feel the residual effects of taxes on the energy industry for producing this power.

If Cap and Trade becomes law, it is estimated that the average Texas household income will shrink by $1,136 a year in 2012, the year the legislation would take effect, due to increases in utility bills, groceries, transportation costs, and more. This could result in a total potential cost of nearly $7 billion for Texas families.

The legislation is also a job killer because some American companies will not be able to maintain operations under the Cap and Trade system's cost burdens and stringent regulations. Studies show that Cap and Trade would result in the loss of 2 million U.S. jobs.

The jobs will move to other countries, thereby increasing our dependence on foreign energy supplies (which already is 60 percent of all the energy America needs). In our state, up to 277,000 Texans could lose their jobs in 2012. By 2030, the number of lost jobs in Texas could rise to 400,000.

While reducing greenhouse gases is an important goal, a better approach is to reduce carbon emissions while simultaneously creating jobs and growing the economy. One way is to expand emission-free nuclear energy. Nuclear energy is clean, safe, reliable, and cost-effective. Today, we have 17 applications at the Nuclear Regulatory Commission for 26 new nuclear reactors. Congress must work to get these reactors online and in production.

Another technology we should be pursuing is Carbon Capture and Sequestration (CCS). This technology holds great promise for reducing pollution because it sequesters carbon, thus preventing its release into the atmosphere. It will also help increase oil production through Enhanced Oil Recovery. In Texas, we are already working on some of America's largest CCS projects. We can lead the nation in commercializing this innovative technology.

These are just a few examples of how we can do something positive for the environment without hurting the economy. We can put America at the forefront of technology development, while creating jobs and stimulating the economy.

Moreover, we can move America forward rather than subject it to a competitive disadvantage to countries such as China and India that do not impose pollution mandates on their businesses and manufacturers, thereby making their products cheaper on the global market.

I believe the goal of carbon reduction through the development of technology is one that we can achieve. But we must be wise in how we choose to meet the challenge.

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