Investing Blog

The new climate change bill threatens virtually every business, consumer and citizen with higher prices for virtually every product. The new legislation could send energy prices skyrocketing and big business out of the United States. To put it simply, the new climate change bill is a tax on productivity, one we don’t need considering the current state of affairs in the US economy.

Let me begin by saying I never intended to turn InvestingBlog to PoliticalBlog. But in today’s market climate you can’t help but stay up on the idiots on DC, otherwise you might find your investments heavily in the red. With an incredibly active congress and an administration and treasury that feel every US business should be owned by the state, these times are certainly no time to be an investor.

While I typically lean Republican, this legislation has nothing to do with party lines. This legislation is important not because of global warming, but because of the huge tax that will be assessed on American’s and American businesses.

The Carbon Credit System

To understand this bill, we must first understand how the carbon credit system works. Basically the United States will issue a certain amount of carbon credits that can be bid on by businesses and people. If you want to emit a ton of CO2, you’ll have to buy a credit for that ton of carbon released.

Since the carbon credit market will work like any other free market, prices will fluctuate depending on the supply and demand for carbon credits. The Congressional Budget Office, which is one of the best economic analysis centers in DC, and likely the most worthwhile government institutions, estimates that 1 ton carbon credits will sell for around $28 each.

Gasoline generally runs about 20 pounds of c02 for each gallon. 100 gallons would make a ton, and require the purchase of one carbon credit. Under this legislation, you’d have to pay an extra $.28 a gallon for gas. But that’s just the beginning for the consumer.

Gas prices will be passed on to virtually every other good. Food prices will explode, and virtually everything at the grocery store will go up in price.

Impact is Biggest on Factories

The manufacturing base is the most important piece to any modern economy. Unfortunately these industries are often the most polluting, and as such, their goods will go up in price as factories look to offset the carbon credit cost.

Even worse is that many of these businesses may find it better to go offshore. Neither Mexico nor China have any carbon credit legislation but offer very cheap labor as well. What will ultimately happen is companies will find it cheaper to produce overseas, eliminating Americans’ off their payrolls and further expanding the US trade deficit.

Little to no climate gain

American’s will be left with little change in the economy. Our pollution will be exported to far-away places without such climate change legislation, and we’ll ship in more goods, using more gas along the way. Any way you cut this bill it looks like the worst bill ever passed by Congress.

Economy