... cap and trade will raise prices (Duke CEO warns of carbon cap):
Duke Energy says electricity rates in North Carolina and South Carolina would rise by at least 13 percent under President Barack Obama's plan to address climate change by auctioning off carbon credits.
Obama would set the nation's first limits on emissions of carbon dioxide, the gas linked to global warming. Under an approach outlined in his proposed budget last week, industries and utilities such as Duke would be able to trade allowances to release the gas.
But Duke CEO Jim Rogers, who supports the carbon cap, says Obama is wrong to insist that those allowances be initially auctioned to carbon emitters. Rogers calls an auction a "carbon tax" that would be passed on to consumers, with most of the burden placed on coal-dependent states such as the Carolinas.
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Allowances auctioned for $15 each would raise rates here 13 percent in 2012, when the system could go into effect, Duke estimates. A $30 auction price would raise rates 27 percent, it says.
Obama's proposed budget assumes allowances would go for $20 each. Most of the proceeds would be returned to taxpayers as payroll tax credits, with the rest supporting solar, wind and other renewable-energy technology.
Another secret that the disingenuous aren't revealing right yet is that (a) carbon permit giveaways will raise energy price as well and (b) prices will rise just as much as when they are auctioned off. The idea is that permits will be scarce reducing the amount of energy produced (and reducing greenhouse gases). As the amount of energy produced falls the price rises. The big difference is who receives most of the higher prices -- the federal government (if auctioned) or electric utilities (if given away).
Duke Power is lobbying to make money on this deal. Since energy demand is inelastic* the higher price will lead to greater revenues for electric utilities (at least in the short run**). Also, the carbon permits will be tradeable so electric utilities that can reduce greenhouse gases more cheaply can sell them to those that can't, making money.
**Those higher coal-based electricity prices will make renewable energy more competitive making the switch to renewable energy more likely to happen sooner rather than later (i.e., we don't need to subsidize renewable energy to facilitate the switch).
And, for the record, I'd plow that extra government revenue into paying down the deficit.
*The percentage rise in price will be greater than the percentage fall in production/consumption.
