Cap-and-Tax Escape

Yesterday's corporate defections from the U.S. Climate Action Partnership (USCAP) won't be greeted with the same hosannas as last year's departures of Nike and Apple from the Chamber of Commerce over its global warming stance, but they're undoubtedly more important. This scales-from-eyes moment shows that some big American businesses are putting shareholders and consumers ahead of politics. The departing are BP America, Conoco Phillips and Caterpillar, which were among the original members of USCAP, a coalition of green pressure groups and Fortune 500 businesses that tried to drive a cap-and-trade program into law. Some corporate members concluded that climate legislation was inevitable and hoped to tip it in a more business-friendly direction. Others—ahem, General Electric—are in our view engaged in little more than old-fashioned rent-seeking. Through regulatory gaming, Congress would choose business winners and losers, dispensing billions of dollars in carbon permits to the politically connected. The climate bills the House passed in August and Senate liberals are contemplating have stripped away that illusion. Carbon tariffs and other regulations would have damaged heavy manufacturing against global competitors, which explains Caterpillar's exit, while oil companies would suffer as transportation, refining and power generation via natural gas were punished. Then there's the harm to long-run growth, which would slow under the economy-wide drag of new taxes and federal mandates...read more