Last Friday on a narrow vote, the US House of Representatives passed legislation to curb greenhouse-gas emissions. The bill, based on the cap-and-trade model, now goes to the Senate.

The bill is designed to reduce global warming; instead, it will likely increase your taxes:

http://online.wsj.com/article/SB123655590609066021.html

The idea is that the government would create a new commodity that is scarce: the right to emit carbon. Then, government would mandate that businesses buy this right. Businesses that need to emit carbon, like those in the energy sector, would likely purchase these permits…and then pass it off to you the customer in the form of higher energy bills.

As the Wall Street Journal article notes:

“The Congressional Budget Office…estimates that the price hikes from a 15% cut in emissions would cost the average household in the bottom-income quintile about 3.3% of its after-tax income every year. That’s about $680, not including the costs of reduced employment and output. The three middle quintiles would see their paychecks cut between $880 and $1,500, or 2.9% to 2.7% of income. The rich would pay 1.7%. Cap and trade is the ideal policy for every Beltway analyst who thinks the tax code is too progressive (all five of them).

Translation: your electricity bill is about to go up. And there will also be an impact on renewable energy, too. Currently, electricity that is produced from wind and solar is sold and purchased on the wholesale market along with other electricity produced from fossil fuels like crude, coal, natural gas, hydro and nuclear. Today all of these sources are priced competitively and renewables cost the same as coal. Renewable energy companies must charge the same rate as fossil fuel producers or today the customer will buy whatever is the lowest cost. Once the cap-and-trade starts renewables will be a very special and nitch market that will be in high demand from big power users. Now energy producers will be able to charge a high premium for their kwh production from renewable sources. That will likely enable the other energy companies to increase their market prices too, which will in turn hammer the small businesses and consumers.

Let me say again that I agree with the President that we need to reduce our oil consumption. But this is not the way to do it. Instead of penalizing all of us with higher energy bills, why not do more to encourage alternative energy, like biomass, solar and wind?