Cap N’ Trade: How It Would Hurt The Industry

Posted on February 2, 2010 by LCT Magazine

NEW COLUMNIST/BLOGGER: LCT welcomes Jae Morey, vice president of, as a guest columnist to discuss issues and challenges facing the chauffeured transportation industry. His first column is below.
So there you were plugging away building your limousine services and wham! The economy began to tank. You pulled up your boot straps, set your heels in the stirrups, and cut back on your costs in order to survive and luckily you did.
You had heard the rumors of other limo services that were cannibalizing their fleets just to keep the doors open and you counted your blessings. However, you started hearing concerns about this thing called Cap and Trade and further how it would affect small businesses. . . ones such as yours. Should you be concerned?
In my conversations with individuals from various positions within the industry, I have found that the whole green revolution is pretty much off the limousine industry’s radar, and that may be O.K. However, as a direct result of this revolution, the Cap and Trade bill is sitting in the U.S. Senate waiting for a vote. If our industry does not pay attention, there may be catastrophic effects on all of us in the very near future.
I have done some extensive research on this subject and I have a mounting fear that our industry will be one of those hardest hit by this debacle. You may wonder why I call it a debacle. Cap and Trade basically works like this. The government puts a cap on all industries and businesses as to how much emissions they can put out in a defined period of time. These caps can be put on various types of emissions including CO2 and others. Once a business reached its maximum, it must purchase emission offsets (the trade part) from businesses that have not reached their maximum. In theory, this type of system will force businesses to reduce their emissions or cause them to pay more for the energy they use.
The largest producers of emissions are manufactures and oil companies as well as other energy producing entities such as utilities. Now I don’t want to go into a long winded diatribe about how this system works with regards to the intricacies of trading and the details on how specific caps work. The thing I want to focus on is common sense economical factors. As it is written and passed now by the House of Representatives, a ton of emissions will cost a company about $28, a seemingly paltry amount. But based on a study done by the Heritage Foundation, these costs will raise the price of energy about 50% to 90% while this system is in place. As we all know, companies will in turn pass those costs on to the consumer…YOU!
Therefore, I have calculated what a company with 20 vehicles would average annually if this system where to be implemented via Senate passage. I want you to bear in mind I am only going to work with the bare minimums of the effects that are the most obvious. There are so many peripheral costs that will be incurred it would take 20,000 words to get to the bottom of it all, so for the purposes of this article I will stay with just a few basics, focused on just fuel and energy costs.
So in my scenario your company has 20 sedans, and of those sedans I will assume that in a week 60% of them are in service every day, or 12 sedans daily are always on the road (your numbers may vary). Assuming that right now your are averaging $40 per day in fuel cost for those 12 full-time vehicles, your additional weekly cost for fuel at the minimum estimation of fuel cost increases of 50% if this system is made law, will be an additional $240 per week. That works out to $12,480 annually. Assuming your offices have an average monthly utility bill of $400, your additional cost per month would be $200 or $2,400 per year. The cost of an oil change would increase by about $20 per vehicle per month or an additional $5,200 per year.
When you add up these costs it works out to more than $20,000, per year or nearly $1,700 per month. That is a pretty healthy burden on any business. But, you are a business too. So the cap and trade system will also put a cap on your business’s energy consumption. Therefore the additional cost to your business may increase significantly due to this bill being enforced on your company. I have not taken into account the economic factors on the clients you service, which will dig deeply into their spending. Nor did I factor in the fact that all businesses will also incur these additional costs, which they too will be compelled to pass on to consumers.
Consequently, if you think about all of the products you purchase to operate your business that are non-energy related, those costs will also go up exponentially. The napkins, soaps, beer, wine, champagne, car washes, plastic ware, cleaning supplies, tires, and car services will all increase in cost. The bottom line is this new legislation will affect all of the expenditures that you make to run your business. If that is true of your limousine service, then what about the impact on all the other businesses that operate nationwide? The numbers can get staggering.
Now here is the real truth of the matter. It is estimated that once this bill is passed, that by 2050 it will reduce the effects of global warming by about 1/100th of a degree. It will cost America’s businesses and tax payers trillions of dollars in wealth and yet have a negligible impact on climate (the debacle component). Let me ask you, is it worth it? I for one believe that we should protect our environment. I believe that we should work toward cleaner energy sources, but at the cost of trillions of dollars and the loss of jobs most likely numbering in the tens of millions. I think it prudent that we allow a debate to occur that comes up with rational alternatives to this bill (this bill was passed without being read). If you agree, you need to call your state representatives today.
Jae Morey is vice president of business development with He writes two separate blogs that focus on the limousine industry. “LIMO-U” is a blog that is educational in nature and covers numerous topics about how to use limousine services for various events and other industry related topics. His blog “The Limo Lane” is about all things limousine with topics that are of interest to limousine operators and customers of the industry.
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