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            Washington, D.C. - U.S. Senator Mike Enzi, R-Wyo, Ranking Member of the Senate Health, Education, Labor and Pensions (HELP) Committee, today introduced legislation to wipe out tobacco use in America through an innovative cap-and-trade program that will shrink the size of the tobacco market over the next 20 years.

 

            “Tobacco kills.  We need new ideas to get people to stop smoking, or better yet, never to start,” Enzi said.  “That’s what my legislation does.  My bill contains a novel cap-and-trade program that will guarantee that fewer people suffer the deadly consequences of smoking, while providing flexibility in how those reductions are achieved.”

 

            “Cap-and-trade programs have a proven track record in the environmental arena, particularly in addressing acid rain.  My tobacco plan is based on the successful program in the Clean Air Act Amendments of 1990.  This system achieved the desired results faster and at lower cost than had been anticipated.  The same can be done for tobacco,” Enzi said.

           

            The cap-and-trade program will reduce the adverse health effects of tobacco use through reductions in the size of the US tobacco market to fewer than 2 percent of the population over 20 years.   Tobacco manufacturers would be required to meet specific user level limits by specified deadlines and the plan would set up a market share allocation and transfer system in which allowances could be used, banked, traded, or sold freely on the open market. 

           

            The Enzi proposal, the “Help End Addiction to Lethal Tobacco Habits Act” (HEALTH Act), would also close loopholes in the law that tobacco companies have exploited and enjoyed for far too long.  It would use proven approaches to help people stop using tobacco products and implement tried and true prevention programs. 

             “Some have suggested that FDA regulation of tobacco is the way toward safer tobacco products.  But we know that there is no such thing as a safe cigarette,” Enzi said.  “Proposals to have FDA regulate tobacco are a misguided attempt to force a deadly product into the regulatory structure developed for drugs and devices – products which DO have health benefits.  The Democrat’s deadly scheme for tobacco would be very costly, and would not result in much of a health benefit.  We can do better.”   

 

The Help End Addiction to Lethal Tobacco Habits Act (HEALTH Act)

 

Title I:  Raising the bar on our knowledge

·          Removes an outdated provision that allows manufacturers to shield from the government which ingredients are in which tobacco products. 

·          Modernizes and standardizes testing methods for measuring and reporting nicotine, tar and carbon monoxide in cigarettes and smokeless tobacco. 

·          Strengthens warning labels on packages – changes to bold warnings with color graphics – a strategy that has been proven to work in the EU and Canada .

Title II:  Determining who uses tobacco

·          Consolidates multiple overlapping surveys on tobacco use to gather the necessary data to monitor the baseline and reductions under Title III.

Title III:  Reducing the number of tobacco users

·          Creates a cap-and-trade program to reduce the adverse health effects of tobacco use through reductions in annual size of the US tobacco market from 2006 levels.

·          Requires compliance by tobacco manufacturers with specific user level limitations by specified deadlines. 

·          Sets up a market share allocation and transfer system.  Allowances can be used, banked, traded, or sold freely on the open market. 

·          The number of allowances decreases each year, ultimately resulting in fewer than 2% of the population using tobacco, versus nearly 21% today – a 90% reduction.

Title IV:  Increasing the tobacco excise tax

·          Increases the tobacco excise tax based on the relative risk of products (see Title V for information on risk classification).

·          Distributes the revenue as follows:  50% to Medicare, 25% to Medicaid, and 25% to tobacco control and prevention.  This maintains the tight link between tobacco tax policy and tobacco health policy.

Title V:  Encouraging tobacco control and prevention, and smoking cessation

·          Establishes an FDA panel to classify tobacco products or groups of products by risk.

·          Gives FDA explicit authority to ban nicotine.

·          Creates a program of counter-advertising, conducted by HHS, and funded from the 25% for control and prevention in Title IV.

·          Closes a loophole in Medicare and Medicaid to provide coverage for smoking cessation, regardless of whether the beneficiary has a diagnosed smoking-related illness. 

·          Enhances the Federal match under Medicaid for states that meet the CDC recommended levels of MSA funds spent on tobacco control and prevention.

 

What is “cap-and-trade”?

                Cap and trade is an administrative approach used to control something, historically a pollutant, by providing economic incentives for achieving reductions in the emissions of that pollutant.  Cap-and-trade programs have a proven track record in the environmental arena, the most dramatic success story being the control of acid rain in the 1990s.  The Clean Air Act Amendments of 1990 instituted a system of allowances for emissions of sulfur and nitrogen oxides that could be used, banked, traded or sold freely on the open market.  The number of allowances decreased each year.  This system achieved the desired air quality improvements faster and at lower cost than had been anticipated. 

               

              In cap and trade programs, the government sets a limit or cap on the amount of a pollutant that can be emitted.  The cap provides the standard by which progress is measured, and it creates an artificial scarcity.  Companies or other groups that emit the pollutant are given allowances to emit a specific amount.  The total amount of allowances is fixed and cannot exceed the cap, limiting total national emissions.  The allowances then have value, due to the artificial scarcity created. The cap is lowered over time - aiming towards a national emissions reduction target.   

             

              Companies must hold a sufficient number of allowances to cover their emissions, or face heavy penalties.  A source that reduces its emissions below its allowance level may sell the extra allowances to another source.  A source that finds it more expensive to reduce emissions below allowable levels may buy (trade) allowances from another source.  Buyers and sellers may “bank” any unused allowances for future use. This system reduces emissions at the lowest possible cost to society. 

             

             In some cap and trade systems, organizations which do not pollute may also buy allowances.  For example, environmental groups could purchase and retire allowances to reduce emissions and raise the price of the remaining credits – the laws of supply and demand in action. 

            

            Cap and trade systems leverage the power of markets to deal with pollution.  While the cap is set by a political process, individual companies are free to choose how, when or if they will reduce their emissions.  Firms will choose the least-costly way to comply, creating incentives to reduce the cost of achieving a pollution reduction goal.  Cap and trade systems are easier to enforce than traditional “command and control” bureaucratic approaches because the government overseeing the market does not need to regulate specific practices of each source. 

            

            Cap-and-trade systems guarantee reductions, and companies are given time and flexibility to meet the targets.  Sources have flexibility to decide when, where and how to reduce emissions.  Making the power of the market work to achieve our policy goals just makes sense.