Cap and Trade or ….Bait and Switch?

What is cap and trade?

The Cap - It is a system that sets a limit or a cap on emissions generated by fossil fuel use. Companies will be given an emission limit based on either a formula or a historical profile. Over time the limit would be reduced to achieve a target that in theory would reduce the cumulative global output to 80% of 1990 actual output by 2050.

The Trade - Companies that perform below their allocated levels can bank the unused units and sell them to companies that exceed their allocated units.

Theoretically, the system would be adopted worldwide and the total global cap would be designed to reduce global warming. This sounds great right?

So are you ready for the rest of the story?

First, the implementation of this program will have a major impact on our economy and your wallet.

- The implementation of this type of program could result in an increase in electricity rates by as much as 60% in the next 10 years.
- It could add an additional $0.30 to $0.40 to the price of a gallon of gas.

Second, the various proposals all require quick implementation so there are no provisions for easing into them. Since, 85% of the energy used in the U.S. is a by product of fossil fuel moving quickly to alternative energy sources will be difficult. First the technology and required infrastructure must be built before it can be adopted. This will be an expensive change. Europe has been attempting to implement these measures since 1997 when many European nations signed the Kyoto Protocol which is an international treaty to reduce carbon dioxide emissions. The time and cost to implement have exceeded original projections. The bottom line for American businesses is their costs will go up making them less competitive in the global economy.

Why would a global treaty unfairly penalize U.S. businesses? To start with, our government will hold our businesses to the standard through federal legislation. This would be fine if the rest of the world would play on the same field. However, this is not the case. Under the terms of the Kyoto Protocol developing and emerging third world nations are exempt from the guidelines. The theory is that the U.S., Europe and Japan were unencumbered by such restrictions during our early growth years so the only fair thing to do is give these developing nations a break in their formative years. As a result China and India are building new coal burning power plants at an alarming rate and by the way these plants are not utilizing clean coal technology. China is now the world’s largest emitter of carbon dioxide but they are completely exempt from Kyoto.

Meanwhile back at home in the U.S., the federal government has piled on the regulations and restrictions that continue to reduce America’s global competitiveness. The Congress and environmental groups have objections to almost every solution to America’s move toward energy independence which translates into a healthier economy.

Here is a list of potential solutions along with the associated objection:

Nuclear power: Cheap and surprisingly safe, despite the safety concerns the industry has had a long record of safe operations in the U.S. There are 439 nuclear power plants operating in 30 countries around the world, 104 in the U.S. This is one of the largest sources of power in Europe. It also has a smaller carbon footprint than other energy sources. Legitimately, nuclear power is the easiest to argue against due to storage, safety and potential target for terrorism.
Coal Powered Electric Generation: The largest source of power in the U.S. coal plants produce the highest level of carbon dioxide of the primary sources. While there is a lot of work on building clean coal technology debate rages over whether it is real and cost effective. Ironically, coal provides the most immediate solution to U.S. energy independence because we have some of the world’s largest reserves. However, if we are not allowed to use it here at home I am sure we will eventually sell our coal reserves off to China and India allowing them to use the cheaper fuel while we pay higher prices at home.
Oil, Off Shore Drilling: The U.S. also has large potential reserves of our shore line but environmentalists go crazy at the thought of off shore drilling. Again, modern technology has made this much safer and more cost effective. While it may not be the answer long term, increased domestic oil production could help bridge the gap short term while we ramp up alternative energy sources.

Ironically, even the green solutions raise the ire of environmentalists:

Solar Power: Solar technology has evolved to a point where base load solar power is now technically feasible. California has started exploring the possibility of constructing such plants in the Mohave Desert. While today it remains relatively expensive 4x the cost of coal powered electricity per kilowatt hour there is confidence in the engineering community that costs could be cut by as much as two thirds as the technology continues to be refined. The only known negative environmental impact is construction of the plants and the use of transmission lines to bring the power back to the population centers. The environmentalists have already started their campaigns to protect the desert and all the areas the transmission lines will be built on. Prompting a frustrated California Governor Arnold Schwarzenegger to say, “They say we want renewable energy but they say they don’t want us to put it anywhere. I don’t know if this is ironic or absurd. But, I mean, if we can’t put solar power plants in the Mohave Desert, I don’t know where the hell we can put them.”
Wind Power: While wind power is one of the cleanest and most environmentally friendly sources for power it still receives continuous attacks from environmental and citizens groups. The primary complaints from environmentalists focus on birds and bats with regard to migratory patterns. While citizen groups often complain about the aesthetics of the turbines themselves. Even Sen. Ted Kennedy, supposedly a supporter of all things green, complained about the Cape Wind Project near his summer home. Of course, wind turbines will also require those nasty transmission lines.

I think you are starting to get the point. Ironically, the U.S. Senate already voted 95-0 against participation in the Kyoto Treaty or any similar treaty.

Recognizing that there is not support in Congress to vote this type of legislation into law, on April 17th the Administration used its’ regulatory power through the EPA and announced that greenhouse gas emission were a threat to public health because they contribute to climate change. This sets the stage for the EPA to regulate emissions from a wide spectrum of sources including vehicles, power plants, manufacturing facilities, oil refineries and airplanes. Soon we will be chasing environmental standards that are unrealistic and hurt our ability to compete in the world. These standards will raise the cost of power, transportation and products for both citizens and most American businesses. This feeds into the larger cycle of government rules and regulations that reduce the profitability of our economy, put us at a disadvantage in the global market and slows economic recovery.

The only winners in this situation will be the multi-national businesses such as GE which spent an estimated $20 million on lobbying efforts on all things green. In addition to their huge footprint in wind and solar power, GE has announced the launch of a new subsidiary called Greenhouse Gas Services, which will facilitate the trading of carbon tax credits. GE and others are poised to cash in on this “crisis” while the rest of us are left to foot the bill.

A few more fun facts on the mythical climate change/global warming that is the driver of these efforts:

In the last 100 years the earth has warmed 0.74 degrees Celsius.

Both man and natural changes have both contributed to these changes.
Historically, weather patterns have changed in cyclical patterns.

In support of weather being cyclical here are a few blast from the past: In 1924 both the N.Y. Times and Time magazine wrote alarming articles about global cooling but by the mid 1930’s both were reporting that we were headed for a period of scary global warming. Then in the mid 70’s, during my high school years, both were back to reporting cooling trends and even a potential second ice age.

There is not conclusive evidence that all of the claims being made by the forces of Al Gore are accurate. In fact there is a large group within the scientific community that do not agree. However, media coverage of this opposing view is limited and most attempts at public debate on the issue gets no notice.

Nitrous oxide and methane which warms the planet at 296 times and 23 times the rate of carbon dioxide respectively is a natural emission of live stock so maybe we should all be vegans and eliminate the pesky livestock population all together. Wait PETA will never go for that.

Environmentally friendly (hybrid) cars seem like a good idea. However here is some perspective - it would take 3 billion Ford Expeditions driving 15,000 miles a year each to equal the amount of carbon dioxide emissions that will enter the atmosphere from China’s increased use of coal powered electricity by 2020. (side note: it would take Ford 15,000 years to sell that many Expeditions based on current sales stats)

Last but not least a few of quotes from leading environmentalist that should leave you wondering if climate change initiatives are about protecting the planet or social reengineering:

“To capture the public imagination, we have to offer up some scary scenarios, make simplified dramatic statements and little mention of any doubts one might have. Each of us has to decide the right balance between being effective and being honest.” - Stephen Schneider, 1989 Schneider was the lead author of the 2007 UN IPCC report. In 1970 he was also the author of one of the reports that lead to the global cooling scare.

From Paul Ehrlich, current president of the Center for Conservation Biology at Stanford University a series of predictions:
1969 - “I’ll take even money that England will not exist in the year 2000”
1970 - “In ten years all important animal life in the sea will be extinct. Large areas of coastline will have to be evacuated because of the stench of dead fish.”
1978 - “Giving society cheap, abundant energy would be the equivalent of giving an idiot child a machine gun.”

And the one that should frighten you the most……

“Climate change (provides) the greatest chance to bring about justice and equality in the world.”
“No matter if the science is all phony, there are still collateral environmental benefits” to global warming policies - Christine Stewart, former Canadian Environmental Minister

This brings us back to Cap & Trade and the Bait and Switch:

The Bait: We are in the midst of an environmental melt down and all good citizens of the world must work together to avert impending disaster. This seems logical and reasonable on the surface if the rules are fair.

The Switch: Turns out the rules are not fair. The U.S. government is not protecting America’s economy or the best interests of its’ citizens by not insisting on a level playing field.

In the end Cap & Trade will be just another undisclosed tax and financial burden on the citizens of the U.S. It is an international wealth shifting program that holds the U.S. to the highest standard while holding China arguably the other super power to none.

Write your representatives and tell them we are not interested in Cap & Trade or subsidizing the cost of switching to alternative energy systems on an artificial schedule. We will be good citizens of the world. Through American innovation we will continue to move toward cleaner energy and more thoughtful environmental policies but not at the expense of our own economic security. Scare tactics aside, we have time to both “fix” the problems and protect our economy.

(Some of the Fun Facts and Quotes courtesy of an Inconvenient Book by Glenn Beck)