Friday, November 30, 2007

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.


Anonymous said...

Rob, it is YOU who is the idiot. You want us to fry here on earth as we pump massive amounts of CO2 into the atmosphere, unwilling to stop our profligate consumption until it is far too late.

It may already be too late. And you will be to blame

MAX Redline said...

LOL! That's hysteria for you, Anonymouse 533. You do realize that CO2 is a neglible issue? You do realize that the most influential greenhouse gas, at 94%, is - water vapor? You know all that, right?

Anonymous said...

Humans are not heating the planet to it's demise.

DonS said...

Rob is right when he says cap and trade doesn't create wealth. It does indeed create a new shell game where the wealth is moved around with control by a confused government to further confuse all of us. Global warming, too much oil purchased from other countries plus peak oil theory...what to do when cars and trucks are integral to our way of life? Cap and trade looks possible to me but risky. Meanwhile the City of Portland works to force us to ride bikes and buses subsidized by those who drive cars. The oil/climate change issue looks messy to me for a long while.

Anonymous said...

I won't call you an idiot but rather a victim of the global warming fraud.

Just watch those four little you tubes and know you have been duped.

Anonymous said...

Here's another laugher coming from the UN Global Warming hypocrites:

(pay special attention anon 533)

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POed said...

Hey Anonymous,

Go f%$k youself. You are a sheep who believes in this anit-human eviro-nazi baulder dash. If your so concerned about people destroying the Earth, then just drink a big old cup of Draino. This way we get ride of a poluter and a douche bag in one act. A$$hole!!!

Anonymous said...

Even if this cap and trade scam passes it will have a negigible effect on the environment. Assume that it reduces US CO2 levels by 15% and that the US is responsible for 20% of man-made CO2 output and that man-made output is very small compared to naturally occuring CO2, you can see that the net result is almost nothing. Nothing except the cost to consumers.

Anonymous said...

Cap and trade is a con game. The bubble it creates will burst like the tulip scam and the sub-prime mortgage derivative scam. Guess who is already positioned to reap huge profits from this scam. That's right, Al Gore, who has already cornered a huge CO2 portfolio to sell to those companies that are "exceeding" their CO2 quotas. Isn't he the one that has been pushing the global warming agenda? Hmmm...

When you create the illusion of wealth from thin air such as CO2, the balloon is bound to burst when every Tom, Dick and Harry and their grandmas are at the tail end of this craze, while the early birds such as Al Gore will be unloading their hordes of CO2 to the unsuspecting lemmings.

Tsk, tsk, tsk!

Michael H. said...

This whole global warming thing has been blown out of proportion. As Rob says, more Co2 is produced by livestock than all the cars on the road. Why not do something about that huh?