Cap And Trade Will Increase Energy Prices Says Moody's

Moody’s is reporting that energy prices will rise 15-30% if a cap and trade system that sells carbon credits for $20 per metric is implemented in the United States.

Reuters: For utilities, the near-term credit impact will be neutral, Moody’s said, mainly because companies will have a chance to adjust financing policies and mitigate risks.

It’s clear, Moody’s said, that operating costs for utilities will rise due to the costs of mitigating for carbon dioxide emissions.

Regulated utilities and public power agencies and cooperatives that will have the right to pass on costs to consumers will be less exposed in the long-term than coal-dependent project financing entities and wholesale merchant generators, Moody’s said.

However, any report that thinks it can accurately predict what a cap and trade system will do to energy prices must be taken with a large grain of salt.

We have no idea what a cap and trade system in the United States will look like. If it is implemented it won’t take effect for many years. Using today’s economy and today’s energy prices to project what a theoretical future change in energy prices could be is risky.

And further, the revenue generated by a carbon auction is intended to go back consumers in the form of a large tax credit.

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