The cap and trade scam

I've been intending to talk about this issue for quite a while, and today is a good day to post it because of the idiotic op-ed Piece in The Funny Paper today.

The “cap and trade” plan for carbon dioxide credits. It is corporate welfare of monumental proportions.

The government decides on the state’s CO2 emissions target that it says is needed to meet its CO2 reduction goals. That is the “cap,” in the “cap and trade.”

Then the government grants CO2 “credits” to companies for the sum amount of the target CO2 emissions. Think of them as rationing coupons. Companies must have coupons sufficient for the amount of CO2 they emit from their operations, which is based mostly on how much energy they use. If they want to use more energy than they have coupons for, they can go buy coupons from some company that has more than they need.

Thus, the “trade” in the cap and trade.

From an economics standpoint, if you want to limit some pollutant, and you can identify everyone who might create that pollutant, this is a very efficient way to do it. Why? Because the system “internalizes” the social cost of that pollutant by imposing a cost on the production of it. Assuming the government is smart enough to set the limit at the socially optimal level (a huge assumption, but let’s go with it,) then the cap and trade system creates the correct incentives. Companies have the incentive to reduce their emission of the pollutant, and they get to sell their credits.

But this assumes there are finite and identifiable sources of the pollutant, and they can all be brought under the system. And it also assumes the government can be trusted to allocate the “credits” in a reasonable, fair way.

For CO2 and other greenhouse gasses, nothing could be further from the truth. First, pretty much EVERYTHING (except young plants) emit CO2. It’s not just energy consumption that emits CO2 – livestock, insects, decay of biomass, and yes, breathing – it all creates carbon dioxide and other GHG's.

So a cap and trade system might start out just using energy consumption as a proxy for CO2 emissions, but that is only a small part of where the CO2 comes from, not to mention other greenhouse gasses like methane and nitrous oxide. The production of meat from livestock actually creates far more greenhouse gasses than all the cars on the road and planes in the sky today.

But a cap and trade system does nothing about these other sources of GHG's. So why do they still push for it? Because this isn’t about solving the phony global warming problem.

It is about 1) government rationing of energy consumption; and 2) big corporate payoffs in the form of energy credits to companies that know they are already under their quota, who would be handed tens of millions of dollars in carbon credits.

That's right – it is a big corporate payoff. Companies that have already invested heavily in low CO2 (read: less efficient) energy sources will finally get bailed out of their bad investments. They will get CO2 credits above and beyond what they need, and they get to sell them.

Guess who was one of the earliest and most vigorous proponents of Kyoto, and lobbied congress to give the EPA regulatory control over CO2 emissions? Enron. They knew that capping CO2 emissions would cripple coal-fired energy plants, and Enron was a big natural gas supplier. So they were simply rent seekers, trying to get the government to enrich them by hurting their competitors.

Plus, Enron would also get the CO2 credits, which they could sell and make a market in. A lovely double-whammy!

The Funny Paper today has an op-ed piece that makes one of the most ridiculous statements I have ever heard about a cap and trade system. I’m sure this idiot believes what he wrote, illiterate as he obviously is about economics. He wrote:

“By capping its gas emissions, Oregon will essentially be creating a new form of wealth out of what had been part of common ownership -- our air.”

Oh, my, it is worse than I thought. He actually believes that issuing rationing coupons creates wealth. If the government issued sugar coupons like it did in WWII, and you didn’t need yours, so you sold them, that certainly would have created wealth for you.

But it came at the expense of others. It is simply a wealth transfer; it doesn’t create a damn dime.

Yet we have people such as this, with no understanding of wealth creation, gracing the editorial pages of a once-great newspaper, making such idiotic statements. We are really in trouble.

Make no mistake, as Oregon goes trippingly down this path with “sustainable energy” mandates, and state based CO2 cap and trade systems, we will do it at an immense cost to ourselves.

You will see politicians of all stripes genuflect to this lunacy, and claim that it creates jobs and grows the economy. They are wrong. It doesn’t.

It is nothing but a huge cost for zero benefit, and a huge financial boon to big corporations who have been trying to build this trough they will feed from for more than a decade.

Oh - and don't forget - also a HUGE increase in government control over the economy.