What's the Real Cost of the Cap-and-Trade Program?

The Congressional Budget Office has released some very interesting numbers (.pdf) on the cost to households of Waxman-Markey. Very interesting, indeed:

On that basis, the Congressional Budget Office (CBO) estimates that the net annual economy-wide cost of the cap-and-trade program in 2020 would be $22 billion—or about $175 per household. That figure includes the cost of restructuring the production and use of energy and of payments made to foreign entities under the program, but it does not include the economic benefits and other benefits of the reduction in GHG emissions and the associated slowing of climate change. CBO could not determine the incidence of certain pieces (including both costs and benefits) that represent, on net, about 8 percent of the total. For the remaining portion of the net cost, households in the lowest income quintile would see an average net benefit of about $40 in 2020, while households in the highest income quintile would see a net cost of $245.

Emphasis mine. So, how long do you think GOP legislators will continue to use the bogus $1,600 cost per household per year figure they’ve been touting? I’m putting my money on “indefinitely.”

Comments

[Dukk:]

Read this about global warming...this has a very convincing analysis of cap and trade.
www.petitionproject.org/

Jun 21 09:27 AM

[Ferdinand E...:]

I'm tempted to examine the numbers in this article a little more closely, but I think that I will desist. Cap-and-trade and the philosophy behind it is so crazy that I will use the 5 or 10 minutes that it would take for examining those meaningless numbers to look in the mirror and admire myself.

Jun 21 09:30 AM

[Mad Hedge F...:]

Who knows? I can tell you right now that cap and trade is going to win the political battle over a carbon tax, hands down. Don’t waste a nanosecond of your time even thinking about it. Nobody wants to be tarred with pushing a new tax, and Wall Street is gearing up to make a fortune in the new trading vehicle. Europe has already adopted the system, and a Paris based exchange called Bluenext, partnered with NYSE Euronext, trades Certified Emission Reduction credits (CERS’s). Some 4-6 million CER’s trade each day worth $50-$75 million. After peaking last year at €30, CER’s crashed to €7.5 in February and then bounced to €12.72 today. They are traded in 1,000 unit lots, and are backed up with far month futures contracts. Check out their cool website at www.bluenext.eu/. Morgan Stanley and Goldman Sachs have already set up trading operations in the instrument. The EC government grants CER’s to green companies, which them sell them to big polluters, which must buy them to expand their business. The costs are passed on to consumers. The system contributed to a 3.8% reduction in CO2 emissions in Europe last year. The current world market for carbon credits is $126 billion, but if the US joins the system that will jump by $1 trillion. I was involved in the creation of the Japanese equity warrant market in the early eighties, and I can tell you that new, poorly understood markets with spreads wide enough to drive a truck through are a license to print money for the early players. Perhaps there is hope after all for the legions of traders, market makers, brokers and analysts left unemployed by last year’s collapse.

Jun 21 09:48 AM

[Mad Hedge F...:]

Here is more data. I wanted to get the low down on clean coal, a political hot potato in the energy sector, so I visited some friends at Lawrence Livermore National Laboratory. The modern day descendent of the Atomic Energy Commission, where I had a student job in the seventies, the leading researcher on laser induced nuclear fission, and the administrator of our atomic weapons stockpile, I figured they’d know. Dirty coal currently supplies us with 50% of our electricity, and total electricity demand is expected to go up by 30% by 2030. The industry is spewing out 32 billion tons of carbon dioxide (CO2) a year and the global warming it is causing will lead us to an environmental disaster within decades. Carbon Capture and Storage technology (CCS) locks up these emissions deep underground forever. The problem is that there is only one of these plants in operation in North Dakota, a legacy of the Carter administration, and they cost $4 billion each. The low estimate to replace the 250 existing coal plants in the US is $1 trillion, and this will produce electricity that costs 50% more than we now pay. And while we can build a wall to keep out immigrants, it won’t keep out CO2. This is a big problem as China is currently completing one new coal fired plant a week. In fact, the Middle Kingdom is rushing to perfect cheaper CCS technologies, not only for their own use, but also to sell to us. Since it appears that Obama is not willing to wait on anything, expect to hear a lot of sturm und drang about CCS this year.

Jun 21 09:50 AM

[ksmithdc:]

Interesting read, thanks.

Jun 21 09:53 AM

[Dukk:]

Sometimes sublety doesn't work...cap and trade is idiotic.

Jun 21 10:15 AM

[Danny Newton:]

The transportation system used to subject itself to a loose set of rules tht configured a benefit to cost ratio process but it failed to live up to its assumptions. If every line item of cost and benefit were actually true, then why didn't car insurance over the decades of implementation get cheaper and the death toll on the highway dramatically drop? I think the problem came with monetizing intangibles like the value of human life. Over 50 years the value of human life kept going up at over 6 times the background inflation rate. The effect was that no project was not worth doing even if it was a worthless project. Air Quality parameters eventually crept into the mix and there was a connection to health issues in the cost-benefit analysis. The whole process became useless and I don't know any state that uses it anymore although some consultants working for lobbiest will use versions of it to prove to the governor or the legislature they are picking the wrong projects.

Also, there are too many examples of simple toll calculations being wrong and they only involve the risk of the interest rate, inflation rate and the risk of estimating the increase of vehicle miles traveled to go wrong. Cap and Trade Calculations are orders of magnitude beyond a simple toll income versus cost calculation. How people can rest easily with the high probability that mistakes won't cancel each other is amazing and shows how emotion driven the debate actually is.

What is the value of cooler and cooler air when people are already living longer and longer? At some point, the incremental increase in costs does not justify the incremental increase in benefit. If Global Warming turns into Global Cooling The credits will become worthless. Wouldn't this make Global Warming a worldwide Bubble ready to pop? Will we set fire to the rainforrest to run back to the perfect world temperature?

I find it interesting that there seems to be no sense of risk in this Cap and Trade Transaction for a lot of people. A few increases in efficiency in Fusion could collapse this whole house of cards. I think Cap and Trade is a Poison Pill of Assumptions and the winners will be those who just say "no."

Jun 21 10:24 AM

[john s. gordon:]

yes wall st will garner millions doing capntrading.
i shudder when i remember enron, the original unregulated "trader".
suggestion to control warming - just tell the volcanos (volcanoes? - apologies to mr. quayle) to burp more often & give us more reflecting dust.
> jack

Jun 21 11:12 AM

[flipdog1:]

I do not believe CO2 is a pollutant,but necessary.
CO2 makes up .o35% of the atmosphere or2.208E12 ton of CO2 of the Total Atmosphere of 5.811E 15 tons.If we do not(can not) account for normal use and sequestration ,and using your numbers, we could double in 70 years .In my opinion, real advances in new, economical, technology will occur in the next 10 years and make carbon tax unnecessary and invalid.
More needs to be done with the carbon cycle before cap and trade.
Global Warming by Human is not settled science!

Jun 21 11:21 AM

[Trane250:]

I don't know how the CBO comes up with their numbers and I question their methodology. What is easy to surmise, though, is that the cap and trade scheme will adversely affect heavy industry and regions of the country that rely on coal generated power. Now Waxman lives in Santa Monica where they don't need much heating and cooling. In the mid atlantic states and the midwest, many people heat their homes with electricity. The Waxman bill will drastically increase the cost of heating homes equiped with electric heat. Many of these people will install a wood burning stove or furnace or perhaps a coal burner. This happened in New England when the cost of fuel oil skyrocketed. Wood and coal stoves and furnaces are not equipped to capture real pollutants like oxides of nitrogen, SO2, mercury and other toxic substances as most coal-fired power plants are. So cap and trade may reduce CO2 emissions a little but at a very high cost and result in an increase in the really dangerous pollutants.

Jun 21 12:52 PM

[Valley Boy:]

I have yet to hear a persuasive argument that cap-and-trade is a solution to the excessive carbon outputs in emerging markets. For instance, will it reduce the slash-and-burn deforestration in the Amazon Basin and the Congo Basin? Will it reduce the incidence of coal mine fires in India, China and elsewhere? Or is it just up to us to bear this cost? It sounds from this article is that the answer is "indefinitely."

Jun 21 02:23 PM

[Bobco23:]

Not only is it idiotic, it is a scam. The only people that believe in global warmning (or now called climate change to cover all possibilities) are fools and those in on the scam.

From an investment standpoint we can load up on the green plays for now, including cap and trade, but keep a tight stop. One day the crowd will declare the king has no clothes and the green play will replicate the dot com play.



On Jun 21 10:15 AM Dukk wrote:

> Sometimes sublety doesn't work...cap and trade is idiotic.

Jun 21 08:35 PM

[AntonioSosa:]

As per a leaked memo from the Obama administration, cap and trade would reduce household income by more than $7,000 each and every year.
www.heartland.org/publ...

Obama’s ACES Act (cap and trade), however, will cost us much, much more than $7,000 per household! It will cost many of us our businesses. It will cost many of us our jobs. It will cost all of us our freedoms and our future.

Cap and Trade “would be the equivalent of an atomic bomb directed at the U.S. economy—all without any scientific justification,” said famed climatologist Dr. S. Fred Singer. It would significantly increase taxes and the cost of energy, forcing many companies to close, thus increasing unemployment, poverty and dependence.

Cap and trade represents huge taxes and cost increases, which will hurt mostly the poor and the middle class. Cap and trade will give dictatorial powers to Obama and will further enrich his billionaire friends (Gore, Soros, Goldman Sachs, Obama’s Chicago Climate Exchange friends, GE, the United Nations, etc.) -- all at our expense and at the expense of our children and grandchildren.

Those brainwashed to the point of wanting to destroy the economy to "prevent global warming" are behaving like the most primitive human beings who were duped into believing that human sacrifices would ensure them good weather. Human beings don't have the power to control climate! And killing the economy will not help the environment. Poor countries can’t protect the environment. Just look at Haiti!

More and more scientists and thinking people all over the world are realizing that man-made global warming is a hoax that threatens our future and the future of our children. More than 700 international scientists dissent over man-made global warming claims. They are now more than 13 times the number of UN scientists (52) who authored the media-hyped IPCC 2007 Summary for Policymakers. www.climatechangefraud.../

Additionally, more than 30,000 American scientists have signed onto a petition that states, "There is no convincing scientific evidence that human release of carbon dioxide, methane, or other greenhouse gases is causing or will, in the foreseeable future, cause catastrophic heating of the Earth's atmosphere and disruption of the Earth's climate." www.petitionproject.org

We pray that honest leaders – both Democrat and Republican - are able to save us from Obama's criminal ACES Act (cap-and-trade) scam.

Jun 21 09:36 PM

[Did U Think...:]

On Jun 21 09:30 AM Ferdinand E. Banks wrote:
" Cap-and-trade and the philosophy behind it is so crazy that I will use the 5 or 10 minutes that it would take for examining those meaningless numbers to look in the mirror and admire myself."

Man I wish people would fully understand. I often read or hear someone talk about these programs being "crazy", "naive", "foolish", or some other descriptor which implies that the government doesn't know exactly what it is doing or why. That's like saying the Chinese martial artist using the drunken boxer style is crazy or that con men are crazy. Government acts might appear to be crazy but deadly logic underlies their moves. This is how the power elite harvest and shear the sheeple who think they are "crazy" for doing so.

Wake up America. Cap and trade is another scam and the joint government - academia driven marketing program for it is global warming. First off, there is no proof that humans are affecting the climate at all. The climate has swung violently over the millennium even without human industrial presence. The record is clearly there in ice samples from old glaciers, etc. But hey, we need another war on something or other in order to justify government racking up more unpayable debt. Debt which funds bigger, more powerful government which is the only real goal of the scam. Grab and retain power the power to SPEND MONEY ON ITSELF.

Wake up Scamerika.

Jun 22 06:45 AM