When President-elect Barack Obama discusses his cap-and-trade policy (it gets good around the 32-second mark), at least he acknowledges “electricity rates will necessarily skyrocket.”

I’m not sure why this isn’t getting more attention. People in this country were outraged when gas was $4-per-gallon. They assumed oil companies were artificially keeping prices high. But Heritage energy expert Ben Lieberman asks:

If large oil companies really were responsible for creating last summer’s high prices, why would they give them up so quickly? And if speculators were capable of profiting by driving prices ever higher, why would they allow themselves to be caught holding the bag in a free fall?”

The moral of the story: markets work, if we let them. The problem is, however, that Obama admittedly recognizes his cap-and-trade plan artificially distorts the market and thus raises prices significantly. But does he understand the true extent of these costs? And does he overestimate the purported benefits of reducing carbon dioxide?

When we make decisions, there are trade-offs. There are costs and benefits to every decision made by individuals and every bill implemented by Congress. To help understand costs versus benefits, economist Walter Williams always provides the extreme example of Congress mandating a 5-mile-per-hour speed limit law. Without doubt it would reduce the tens of thousands of traffic fatalities but think of all the inconvenience, delays, and frustration that would result from this law.

The problem is: the benefits to cutting CO2 are negligible. Even the Environmental Protection Agency found that a 60 percent reduction in CO2 emissions by 2050 in the U.S. alone would affect world temperatures by 0.1 to 0.2 degrees C. It would take a global policy with the same cuts to reduce world temperature by just 1 to 2 degrees C.

What about the costs? Heritage’s Center for Data Analysis calculated the costs of global warming legislation in the U.S. alone and the cumulative GDP losses for 2010 to 2029 approach $7 trillion. Single-year losses exceed $600 billion in 2029, more than $5,000 per household. Annual job losses exceed 800,000 for several years. That’s a scary price to pay for what little benefits we receive.

This isn’t a knock on Obama. Sen. John McCain would have readily signed a cap-and-trade bill if he were elected president. But he wasn’t and Obama was. Some members of Congress have backed off a cap-and-trade plan because of the economic damage it would inflict. It’s time to realize this isn’t good policy. Not now. Not ever.