Don't think that cap-and-trade legislation comes at a cost? Well, think again.
In a June 9 interview on Bloomberg as the U.S. House of Representatives was considering the Waxman-Markey bill, David Sokol, chairman of Berkshire Hathaway Inc’s (NYSE: BRK.A) MidAmerican Energy Holdings and a contender to succeed Warren Buffett as Berkshire Hathaway’s CEO, explained capping carbon dioxide (CO2) would be a policy decision his industry would deal with, but trading emission credits was another matter.
“Let me break it in two parts,” Sokol said. “The caps – trying to reduce CO2 by 83 percent by 2050 and then some interim steps – if that’s government policy, we’re fine with that and we will achieve that through our utilities, and that’s a huge cost unto itself. But again, that’s policy and if that is the policy of the land.”
According to Sokol, the trade part of cap-and-trade would create additional costs for the consumer because there are prohibitive costs for utility companies involved with trading carbon credits – the cost of the credits themselves, which would be passed on to the consumer.
“The trading side for the utilities sector is a disaster because it will basically duplicate the costs for all of our consumers,” Sokol said. “In our states, it reflects roughly 28-percent tax increase on consumers, but it doesn’t reduce a single ton of CO2. So, put the caps in place, we’ll meet them. But, do away with the trading side from a utility perspective because it will be hugely unacceptable to consumers.”
The resources put toward a cap-and-trade system would be better used put toward technology used to strip CO2 from the emission he said.
“It creates a false tax to the system,” Sokol explained. “The reality is the only way you remove CO2 from a coal-fired or gas-fired power plant is to either replace it because there is no technology today to strip CO2 out of the exhaust stream. So, those dollars are going to have to be spent ultimately to meet these caps anyway. That’s where the money should be spent.”
The net result of a trading system: $120 added to the average family’s electric bill, Sokol explained.
“Adding this trading regimen to that again is a duplicative cost,” Sokol added. “A number of the utilities are OK with that because they’re protected under state law they can just pass it through to the consumer. We think somebody has to be here representing the consumer because we’re talking about numbers that are for the average family, it’s a $120-per-month increase in their electric bill and they’re not doing anything. Nothing of value comes from it.”
Despite Sokol’s concerns, Sen. Jim Inhofe, R-Okla., the ranking Republican on the Senate Environment and Public Works Committee, told an audience at the Heartland Institute’s Third International Conference on Climate Change in