The United States is following Europe’s lead in instituting cap-and-trade systems to reduce CO2 emissions, but the country is split between Democrat-run states that have passed cap-and-trade mandates and Republican-run states that appear to have no intention of doing so.
In the middle are several swing states that have entered, then exited, cap-and-trade pacts, depending on which party gains the upper hand.
Advocates of cap-and-trade hail it as a “market-based” solution.
“The cap on emissions guarantees the environmental results we need. Trading gets it done in the cheapest way possible.”
But some critics are skeptical, arguing that it is essentially a tax on energy that gets passed on to consumers and commuters and that insiders may benefit more than the environment from the enormous sums of cash paid into the system.
“Cap-and-trade is a very interesting theoretical model to try to solve a policy problem, but it’s one that ultimately ends up just moving the costs around,” Ryan Yonk, an energy economist at the American Institute for Economic Research, told The Epoch Times.
“Ultimately, the people that pay are the end consumers. The people that benefit are the market creators, and that’s really one of the major concerns.
“If you’re going to have a cap-and-trade system, those that are facilitating the transactions, the middlemen that are involved, will ultimately be those that benefit most directly.”
Indeed, an industry has sprung up around carbon pricing systems, with stock exchanges vying to become financial centers for carbon trading and financial firms looking to profit from making markets in this new currency.
In addition, accountants and consultants earn fees to develop investable carbon-offset projects and to quantify the environmental benefits. Companies that develop wind and solar production or carbon-capture technology are also often recipients of carbon-offset payments under these systems.
Following Europe’s Lead
Europe led the way in mandating a cap-and-trade system, establishing the European Union Emissions Trading System in 2005, which regulates about 10,000 manufacturing and energy facilities and air and maritime transport. According to the EU, this system has reduced industrial emissions by 37 percent since its founding.The Obama administration attempted to implement a nationwide cap-and-trade system but noted that Americans would end up paying more.
He said coal-powered plants or the natural gas industry, for example, “would have to retrofit their operations—that will cost money [and] they will pass that money on to consumers.”
Since then, Democrats have been successful in implementing these mandates only at the state level.
In 2009, Connecticut, Delaware, Maine, New Hampshire, New Jersey, New York, Vermont, Massachusetts, Rhode Island, and Maryland officially started the Regional Greenhouse Gas Initiative, a cap-and-trade pact that ultimately expanded to include a dozen states throughout the Northeast and Mid-Atlantic regions.
The remaining $17 billion was designated for projects such as putting affordable housing near job centers, building high-speed rail, and “adding zero-emission transportation options in underserved communities.”
“In other words, they’re what scientists have said all governments need to do in order to avoid the worst impacts of climate change.”
The revenue raised from the sale of allowances must be invested in projects that “help to achieve state climate change mitigation and resilience goals,” the Washington State Department of Ecology, which runs the program, stated.
Across the United States, the billions of dollars raised under cap-and-trade programs can go to a variety of causes, many with a social justice component, depending on individual state laws.
Conservatives Attempt to Withdraw
Virginia and Pennsylvania joined the Regional Greenhouse Gas Initiative (RGGI) in 2021 and 2022, respectively, but conservatives in those states have been fighting ever since to withdraw from it. Virginia withdrew in 2023 by executive order of Gov. Glenn Youngkin.
“In a filing before the State Corporation Commission, Dominion Energy [the state’s largest electric utility] stated that RGGI will cost ratepayers between $1 billion and $1.2 billion over the next four years.”
This not only creates hardships for residents in terms of higher energy bills, but also incentivizes companies in manufacturing and tech sectors that use material amounts of electricity to consider lower-cost states.
Utilities in California, for example, currently charge businesses on average 22.86 cents per kilowatt hour. The five states where electricity is least expensive—North Dakota, Oklahoma, Utah, Texas, and Wyoming—all charge less than 10 cents per kilowatt hour.
There is an ongoing fight between Virginia’s governor and the Democrat-controlled Legislature to return the state to the RGGI. State lawmakers attempted to include in this year’s budget legislation a provision that Virginia must reenter the RGGI, but Youngkin vetoed the provision.
Conservatives in Pennsylvania fought RGGI membership in court, and the state has been enjoined from taking part in it pending a ruling by the state’s Supreme Court.
New Jersey withdrew from the pact in 2012 but reentered in 2020.
In Washington state, an effort sponsored by a resident asset manager and beekeeper Brian Heywood and his organization Let’s Go Washington is seeking to end that state’s cap-and-trade program through a public referendum.
“It’s a regressive tax that builds on the fears of people but then doesn’t deliver anything,” Heywood told The Epoch Times.
The state’s carbon offset regime “takes money from commuters and shoppers and people who are so brash as to want to heat their homes in the wintertime,” he said.
However, according to Halter, “the CCA is not a tax, though it does put a price on greenhouse gas emissions.”
“Unlike a tax, the price on emissions is set by the market, not the state,” she said. “It’s also worth noting that climate change disproportionately impacts communities that are already disadvantaged due to factors like income and race.”
Washington state residents will be able to decide for themselves whether they want to keep their cap-and-invest program, as the question will appear at the top of this November’s ballot.
After spending millions of his own money, Heywood was able to collect the 400,000 signatures necessary under state law to put a referendum to a public vote.
Despite the fact that Washington state is a “trifecta” state, in which the Democratic Party controls the governorship and both houses of the Legislature, Heywood said he believes he has a good chance of gaining enough support for his referendum to pass.
“There’s a split on the left here ... and the progressives have overreached,” he said. “Liberals are not going to vote Republican any time soon, but they’re sick and tired of the stupid [things] that the super-progressives have done.”
