Western States Economic Suicide Pact

OK, here we go! The "Western Climate Initiative," has released its draft plan for the regional greenhouse gas cap and trade scheme.

Mark the date in history! Years from now, when the government bureaucracy that is charged with administering this disastrous program has reached its full-grown, intrusive, stifling maturity, we can all think back to the heady days when the planners and environmentalists and power-hungry politicians birthed this mutant monster.

You really have to go read the draft to understand just what they want to do to our economy and our way of life. The details are at once chilling and vague.

I'll take a run at describing it, half formed though it is:

The arbitrary goal has been set to reduce greenhouse gasses (GHG's) by 15% under 2005 levels by the year 2020. There isn't anywhere I could find any estimate of the benefit of doing this. They say their goal is to reduce gasses enough to "significantly lower the risk of dangerous threats to the climate," which they say will actually require reductions in CO2 by 50-85% by the year 2050.

OK, stop right there. Here they are proposing a huge new tax, a huge new government program, and there is only the most vaguely formed rationale for any way it will benefit us. The documents basically assume that CO2 reduction is obviously good in and of itself, no real reason necessary to propose draconian limits on energy use to justify it.

Moving forward:

Together, the "Partner" states and provinces (OR, WA, CA, NM, MT, UT are the states) will estimate their actual emissions of the greenhouse gasses (GHG's) they plan to regulate, and this will be the "cap" in the first year of the program, 2012.

So the governments will have to try to measure the GHG's emitted by every manufacturing plant, commercial facility, the transportation sector, residential, electrical generation plants, cogeneration plants, etc. So starts the bureaucracy. Obviously the only way to do this is to mandate some system for monitoring and reporting by all the regulated entities.

Since these initial levels become the first "cap," and each of the regulated entities knows that their own baseline measure will also become their cap level upon which all future reductions are based, and since the method for actually measuring and monitoring the carbon footprint of all these different entities is subjective at best, there is plentiful opportunity and incentive for game playing, political deal cutting, and what economists call "rent-seeking."

So, once this baseline cap is set, every three years there will be a ratcheting down of the cap in a straight line until the 15% reduction is met by 2020.

Now for the "trade" part of the scheme. This is where it gets pretty funny, because they studiously avoid admitting that the scheme is basically a hidden tax on energy use, but they make all sorts of vague references to how they will use all the money they collect, because that is the point of the whole exercise in the first place.

Each state, after taking its baseline reads, will grant "allowances" to each regulated entity. This is their GHG cap. They left open to each state whether these allowances are just given to the regulated entity, or if they are 'auctioned" (read: taxed.)

This is where all the shenanigans will come. Here's the deal: the state is proposing a ubiquitous tax on every consumer and producer of energy. All these industries and firms aren't going to just sit back and bear the brunt of the new tax. But they DO see the train coming down the track.

So every single one of them are going to use their political influence to make sure the train hits the other guy, or even to manipulate the structure of the program so that they actually make money on the deal!

For instance: the timber guys will try to get tree planting programs approved as carbon sink offset programs, so regulated entities can pay them to plant trees rather than buy carbon credits on the market. But the bureaucrats know that they can't allow ALL the potential revenue to go to offset programs - they want their money! - so they will negotiate precisely how much of the carbon reduction goals can be met by carbon sinks, and how much by purchasing credits.

Yep - there it is, section 9.2 - an arbitrary limit on offsets, which they will probably set at 10%. How did I know?! Every other industry and company will be in the game, too, and there are limitless ways those with political influence can lessen the impact on themselves and push it over to the other guy.

Now, as I said, the point of this whole exercise is for the governments involved to tax energy so they can funnel the money to all their friends for the plethora of environmental and sustainability projects. But they have to strike a balance.

As I said, each state gets to decide what percentage of the "allowances" are 'auctioned" and what percentage are "granted." Essentially, this is a way to pay off the various industries so they go along. The question is basically how much wealth will be transferred from consumers to government, and how much from consumers to industry. The plan leaves that up to each state, but they are trying to decide on a "minimum percentage of allowances subject to auction by each state."

This is how they talk. "subject to auction" means TAXED. When they say "allowances" that means "how much energy we will let you use." When the talk about "the value of each partner's allowance budget," they mean "how much tax money is raised by forcing regulated entities to purchase the carbon credits."

And oh, do they have big plans for that money! :

• Energy efficiency and renewable energy incentives and achievement;
• Research, development, demonstrations and deployment (RDD&D) with
  particular reference to carbon capture & sequestration (CCS);
• renewable energy generation, transmission and storage; and energy efficiency;
• Promoting emission reductions and sequestration in agriculture and
  forestry and other uncapped sources;
• Reducing consumer impacts, especially for low-income consumers;
• Providing for worker transition and green jobs;
• Providing transition assistance to industries;
• Adaptation to climate change impacts;
• Recognizing early actions to reduce emissions; and
• Promoting economic efficiency.

Nowhere is there any talk of how much tax money will be raised through this scheme. Imagine! They are proposing a monumental tax on energy to supposedly save us from global warming. But nowhere do they: 1) estimate the actual benefit in terms of how much global warming will be reduced, or 2) tell us how much we are going to pay!

Of course, the crack journalists at our daily so-called newspaper can be counted on to drill down and ask the tough questions, right? (Insert belly laugh here.)

Yeah right - here is what The Funny Paper reported, in their single article, buried in the business section, had to say about the cost:

"State officials who unveiled the approach in Gov. Ted Kulongoski's offices said the draft strategy's mandates may push power rates and fuel prices up slightly. But Oregonians should see lower bills in the end because the strategy promotes conservation measures that should reduce energy use, they said. "

OK then! Who could possibly need any more than that? The bureaucrats say this will actually SAVE us money! No need for any other opinion on it. Good enough for us!

OK, I am running out of time here - I have to catch a baseball game. I'll probably drill down more on this later. I hope everyone can see, however, what a monstrosity this will quickly grow into.

A huge tax increase, the amount of which they will not estimate, with no pretense of even estimating how much or whether the tax would solve the problem that they claim requires the tax.

Madness!