Cap and trade laws could change Oklahoma’s financial climate

Paul Shinn // May 29, 2009 // Updated: September 23, 2026
OK Policy Articles & Research //

Cap-and-trade limits of carbon dioxide emissions are burning up a lot of ink these days. Briefly, the idea is to set a limit on how much CO2 and other greenhouse gases could be created each year. Companies that create these gases–utilities, refineries, factories, and perhaps even ranches–would have to buy permits to do so. Permits would be traded on a market. The cost, of course, gets passed through the supply chain and ultimately to the consumer.

The White House has put its weight behind a market-based approach to emissions and a bill is starting its way through Congress. The New York Times suggests that this policy has broad enough support that it’s achieved the status of consensus. The approach

has been embraced by President Obama, Democratic leaders in Congress, mainstream environmental groups and a growing number of business interests, including energy-consuming industries like autos, steel and aluminum.

The Times apparently forgot to check with some Oklahoma elected officials. Rep. Frank Lucas (R-Cheyenn) has joined the Rural American Solutions Group in condemning cap and trade as unfair to rural residents:

On Tuesday 16 Republican members of the U.S. House, all members of the Rural America Solutions Group, spoke out against the American Clean Energy and Security Act of 2009. Choosing to call it “the Democrats’ national energy tax on rural America,” they said the bill would disproportionately spike rural American energy bills, harm agriculture production and threaten small businesses.

The Oklahoma House of Representatives has also weighed in against cap and trade.

It’s outside our areas of interest and expertise to take a position on the fight in Washington. We are very interested, though, in the implications of carbon limits for Oklahoma’s low- and middle-income families and for overall  tax and budget policy. And we’re happy to admit we don’t know what those implications are. Here are some questions that will need to be addressed before we can get a better understanding:

  • How does cap and trade affect households with average or lower incomes? They spend more proportionally on energy than other households, both in direct costs for gas and utilities and indirect costs included in the price of food and other goods. The Center on Budget and Policy Priorities indicates the impact of climate change legislation could be negative, but reports that the current bill “fully offsets” the impact through a tax credit for families of four earning up to $50,000 and through an additional energy refund program. Oklahoma may need to monitor this program and decide if additional state assistance, similar to the earned income tax credit, is needed.
  • What will the effects be on the national economy? Will energy prices spike immediately? How would that affect the recovery? What economic growth can we anticipate from developing cleaner energy technology? When? Oklahoma could be a leader in this field thanks to abundant resources of natural gas, wind power, solar energy, and biomass.
  • Will energy producers see higher incomes even after paying for carbon allowances? If so, Oklahoma could see significant increases in revenue from gross production, income, and sales taxes. And city governments could gain from higher utility franchise tax revenues.
  • What’s the impact of higher costs to heat and cool offices, prisons, and schools and to fuel patrol cars, ambulances, and school buses on state and local budgets?
  • Will higher gas prices make a significant change in Oklahomans’ driving habits? If they do, our flat-rate gas tax revenue will suffer and turnpike revenues could drop. That could mean less money for maintaining roads.
  • Will higher gas prices change peoples’ minds about where they want to live and how they commute? Oklahoma is among the national leaders in vehicle miles traveled, thanks to our sprawling urban areas and comparatively low levels of transit service. If people suddenly want to live closer to work or use public transit, we could be caught flat-footed and lose out on opportunities for economic growth.

Congress and the President might or might not establish cap and trade this year. We think it is important to consider how action in Washington could affect us here in Oklahoma, whether it happens this year or not. If you think there are other questions to address, have an opinion, or want to suggest something we should read, please join in the conversation!

ABOUT THE AUTHOR

Paul Shinn
Paul Shinn // Twitter @PaulinOKC // pshinn@okpolicy.org

Paul Shinn served as Budget and Tax Senior Policy Analyst with OK Policy from May 2019 until December 2021. Before joining OK Policy, Shinn held budget and finance positions for the Oklahoma House of Representatives, the Department of Human Services, the cities of Oklahoma City and Del City and several local governments in his native Oregon. He also taught political science and public administration at the University of Oklahoma, University of Central Oklahoma, and California State University Stanislaus. While with the Government Finance Officers Association, Paul worked on consulting and research projects for the U.S. Environmental Protection Agency, the U.S. Department of Transportation, and several state agencies and local governments. He also served as policy analyst for CAP Tulsa. He holds a Ph.D. in Political Science from University of Oklahoma and degrees from the University of Oregon and the University of Maryland College Park. He lives in Oklahoma City with his wife Carmelita.