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Cap and Trade Will Hurt New Mexico

Late last week in a post about energy policy differences between the two presidential candidates, I mentioned that cap and trade legislation that would hurt New Mexico’s economy was on the table for the upcoming general legislative session. In today’s Journal, John Fleck confirms that this new way of increasing the cost of oil and gas production is on the table:

Many New Mexico companies, especially power producers and the oil and gas industry, would have to begin reducing greenhouse gas emissions or pay a price beginning in 2012 under a plan being developed by seven Western states and four Candadian provinces.

But motor vehicles, which account for a big share of the region’s emissions linked to global warming, would get a pass until 2015.

The Western Climate Initiative would set caps on emissions from power plants and other industries in the seven states and four provinces involved.

Companies would be allowed to exceed their caps only by buying credits from others that have reduced their emissions more than required. The program, called “cap and trade,” is an attempt to enlist market forces to make greenhouse gas reductions as economical as possible.

A draft of the proposal, more than a year in the making, was unveiled in a series of meetings around the West over the last two weeks, including a gathering in Santa Fe on Friday.

Make no mistake this is an additional fee that will ultimately be passed on to you and me – the consumer – at the pump. Whenever government seeks to impose fees to help with some grand scheme, we are the ones who find ourselves squeezed. This time will be no exception. What makes this flawed policy even worse is that the negative impact of this misguided legislation will be felt not once, but twice by hard-working New Mexicans.

As the cost of producing oil and gas in New Mexico increases due to cap and trade, we will see a decline in oil and gas production in the state. This will severely cut into state revenues which are highly dependent on this industry. A decline in oil and gas industry revenue for the state will, mark my words, result in additional taxes. After all, state spending has nearly doubled under the guidance of Governor Richardson, and when the Democratic controlled legislature is faced with decreasing spending or increasing taxes, they inevitably choose the latter.

The second way, we will feel the pinch is through yet higher prices at the pump, and for that matter, all transportation and related costs (read: food). These higher prices will squeeze the working poor and middle class families the hardest. And, all for nothing. Why, for nothing? Simple. Just read the closing thought from the John Fleck article (subscription):

Even among those who favor greenhouse gas reductions, a cap-and-trade proposal that does not have global reach has its detractors.

One risk, according to University of Colorado political scientist Roger Pielke Jr., is that a cap-and-trade system here in the United States, either regionally or nationally, could reduce our consumption enough to cause a corresponding global drop in the price of fossil fuels.

In response, countries like China might then increase their consumption, Pielke said, resulting in no net reduction in greenhouse gas emissions.

Regardless of which side you take in the global warming argument, this can’t be seen as anything other than an empty political move with potentially devastating effects on New Mexico families.