Carbon Credits: An Economic Scam

Ok, I don't usually wade into the entire "global warming" schism on this board, preferring to write about it on Musings instead.

But this is going to hit the economy, and as such I'm compelled to do so.

You have to be living under a rock to not know that The House passed an "energy bill" late Friday that includes what amounts to a carbon tax via so-called "cap and trade."

Let's first define what this is - "Cap and Trade" is a taxation system when what you do (commercially) that causes carbon dioxide to be emitted into the atmosphere is subject to tax, as a disincentive to do so.

The justification for this, as Krugman (and others) claim, is:

And as I watched the deniers make their arguments, I couldn’t help thinking that I was watching a form of treason — treason against the planet.

To fully appreciate the irresponsibility and immorality of climate-change denial, you need to know about the grim turn taken by the latest climate research.

To read the rest of Paul's screed you have to be ignorant of basic mathematics. Not calculus, not differential equations, not even geometry or trig.

Math. Fifth-grade stuff. You know, grade-school - specifically, percentages.

Let's assume for the sake of argument that the "global warming" folks are right. I am not sold, but for the purpose of this discussion I'll grant the hypothesis that man is causing the planet to get warmer as a consequence of his emission of CO2 (sequestered millions of years ago into the earth's crust and elsewhere) into the atmosphere.

Here's the problem: North America has about 330 million people in it, most of them in The United States. That's a lot of people.

But Asia has 4 billion people living in it, or more than 10 times as many. And unfortunately most of them are living at a vastly inferior standard of living compared to ours. Africa has about 970 million people (three times North America), and again, nearly all are living vastly below our standard of living.

We're 1/15th of the population in question and nearly all of the rest of the people involved are going to dramatically increase their per-capita CO2 output whether we like it or not.

Herein lies the problem: While we emit more CO2 per-capita than anyone else today, we won't be emitting the most CO2 for very long on an aggregate basis.

To actually stop the increase in CO2 emissions we would have to find some way to compel the Asians and Africans to not increase their CO2 emissions.

But all possible means for them to improve their standard of living inherently involve significant and even dramatic increases in CO2 emissions per-capita.

The math is simple: Within a few years China will emit more CO2 than we will. A few years after that both Africa and India will surpass the United States. None of these regions will agree to stop emitting CO2 because to do so is to agree to keep their people perpetually poor and agrarian while we enjoy the fruits of a westernized, industrialized economy.

That's not going to happen and yet without it happening no amount of bleating about "climate change" or laws passed to curtail our CO2 output will do a thing for the climate of the planet. It will not make any material difference to the outcome; indeed, oil companies have said that they will simply move refining and other operations to nations without such pacts (like India and China!) to avoid the tax, and pass through any impact in the US directly to consumers.

The amount of CO2 emitted will not go down, but your costs will go up, making the only net effect economic: you will be poorer and whatever man-made effect exists on the climate will continue to exist.

If we were truly interested in the welfare of the planet we would recognize that short of thermonuclear war developing nations are not going to agree to stop developing. We would thus divert our attention toward dealing with the changes that come with our planet's climate, whether it is in fact warming due to our activity or whether the changes in climate are more mundane (read: due to the sun.) We would thus deploy our money where it could actually do some good, such as flood control and population relocation, along with modifying farming and other production resources to be able to suit changing climactic conditions.

Instead we have so-called "economists" like Krugman who are incapable of doing basic 5th grade math resorting to emotional pleas to try to guilt us into ignoring the basic mathematical facts: this bill will do nothing to address any actual problem and can't, simply because the lions share of the people on the planet will not agree to go along with any plan we might formulate - and this assumes the "global warming" crowd is right.

Comments

[petyaczar:]

Man made gLobal warming is a hoax, and cap and trade is a Madofff like scheme to make money by trading "rights".. This is OK with the Feds because it results in the largets tax increase in history and transfers power from the people -the market - to the Federal government.

I have forest land in Wisconsin.-nothing but trees. It emits zero Co2. The guy down the street emits 2 tons Co2 per second, He must buy a "right" from me, in order to continue to do what he is currently doing.

Net co2 into the atmosphere is unchanged = 2 tons co2per second, I get some cash for selling a "right" -the Trade- and the govt gets a payment in the form of taxes for both my right to make the trade and the others guys right to mitigate the cap.

A FARCE!!!!!!!!!!!!!!!!!!!!

Jun 30 09:48 AM

[Fred W:]

the blame game is so childish...Bush this Bush that...Obama this Obama that...you sound like a bunch of spoiled kids on a playground.
There is plenty of blame to spread around to ALL political parties.


On Jun 29 08:33 PM PhillyDan wrote:

> The Bush administration caused this financial collapse, plain and
> simple, stop blaming it on Obama!!!! Deep recessions like this that
> were caused by the Repubs who catered to the wealthy and greedy.
> It will take time to dig out of the hole but it is already happening.
> Come back next year at this time and I am willing to wager good money,
> that unemployment will be around 7.5% and dropping.

Jun 30 09:54 AM

[Fred W:]

Agreed...level the field and let's see what wins the "game"
Cheap electricity might not appear soooo "cheap" if you live within a 100 miles of a coal mining operation--but of course the "important" people don't live near THOSE places--we save them for the "other" poor suckers.


On Jun 30 09:48 AM Zenfar wrote:

> I for one think we should start by dropping any coal, oil, or gas
> subsidies. This would actually save the government money. Next
> we could consider positive incentives for renewables and clean energy
> sources. If we had to do something more aggressive I would prefer
> a carbon tax less chance of an Enron or Madoff.
>
> Technology will save the day again. Us geeks will keep working in
> our labs, fixing the mess the rest of you make. Solar will help
> us out of the mess. There is a worldwide need for cheap energy but
> the source could just as well be clean as dirty. Solar has the potential
> for Moore's law type improvements over time. Wake up America, we
> have to stop fighting each other and get to work.
>
> Long ENER, SPWRA

Jun 30 09:58 AM

[Troy Jensen:]

Hate it or love it, Cap and Trade is on the way. We can all sit here and just call Global Warming "A Hoaz", "A Trojan Horse for Converting America to Socialism".....etc etc.

Realism always wins the day in my view of the economy. SO if it's here, and we know this Administration, as well as a growing majority of the country (major cultural shift going on - that type of momentum is impossible to stop), then let's adopt the RIGHT free-market solution...and take the leadership role in reducing gHg in the world, rather than eventually being forced into a European solution when it's too late.

I agree, there are flaws in the bill. But it's a start. Instead of bashing, let's see what comes from the Senate, what is actually signed into law, and THEN, what actually evolves from these early stages.

In the end, technology will indeed win the day (nice, Zenfar). I see it daily in my industry, truly amazing what solar and wind energy generation systems are in the R&D pipeline, the amount of PRIVATE investment into the Renewable Energy sector, and the downward pressure on solar and wind energy generation system component costs as manufacturing infrastructure ramps up, along with the flow of investment funds and new technologies being introduced daily.

Final word - I'd advise everyone bashing this bill to really think about these words - National Energy Security. Whether you think global warming is a hoax by the granolas and socialists, there is a reality - there is NOTHING more critical to US National Security than reducing, and eventually eliminating, our dependence on a finite foreign source of energy, derived from the most geopolitically unstable area of the world. Every American should agree reducing our energy import levels from the Middle East must be a major priority.

40% of the US's electricity is derived from....petroleum.

Jun 30 10:30 AM

[Ferdinand E...:]

Until yesterday I was prepared to agree that Carbon Credits - or more correctly, selling carbon credits - could be described as an economic scam, but now I am not sure.

You see, the environmentally friendly Swedish minister of the environment was informed by someone - in the cabinet, or maybe someone in his dreams - that selling carbon credits put a burden on Swedish industry, and so while proclaiming the wisdom of selling credits, he simply gave a load of them away to large Swedish manufacturing firms . Love that solution, because it happens to be the case that Sweden is one of the environmental roll models in the world (thanks to nuclear and hydro in the electric generating sector), and so we don't need no stinking carbon credits raising the level of unemployment.

A large group of parasites from the EU comes to town tomorrow to join the Swedish EU parasites, and so I suppose that the environment minister will have to collect some money from the big corporations, but by passing out those previous credits he has shown that his brain is in the right place - as compared e.g. to the present prime minister and the other EU groupies.

Jun 30 10:56 AM

[Paul777:]

This article is right on the money. Cap and trade "taxation" proposed by the tax and spend Democrats will cause an increase in prices paid by US citizens as companies pass their increased costs on to the consumer. Period. It will also cause the loss of jobs and capital investment in the US as energy companies move their operations to locations with more favorable tax and environmental laws, or lack thereof. US citizens will pay more for their energy (electricity, gasoline, heating oil, natural gas), transportation and freight (diesel fuel, jet fuel), plus products that are manufactured and transported in the US. This is simply another attempt by Obama and the liberal Democrats to transfer wealth and jobs from the working American public to the non-working here and abroad, respectively. As far as cost increases resulting from this bill, let's do a simple and easy calculation concerning only one of the above energy costs, gasoline. Gasoline price increases from this bill are estimated at between 25 and 77 cents per gallon. Therefore, let's use 50 cents per gallon for this calculation. A working couple that each drives 25,000 miles per year (I drive 50,000 miles per year) in a 30 mile per gallon car will spend $833 more on gasoline alone!! Do the math (50,000 miles divided by 30 miles per gallon times 50 cents per gallon equals $833.33). Now add increased utility rates for electricity, increased home heating oil costs, increased food and product prices due to higher production and transportation costs, etc. and you could easily surpass $1,000 per family in the US. What we need to stimulate the US economy during this time of high US unemployment and recession is lower prices and taxes, not higher. Cheaper energy, not more expensive. And more high paying domestic jobs, not less. Call, write and email your US Senators!! Tell them to vote AGAINST the passage of this bill in any form. Let's get back on our feet first before we try to save the world AGAIN at the expense of our economy and families!!

Jun 30 11:14 AM

[Gravity404:]

The Obama administration is claiming that Cap and Trade will increase demand for renewable/green energy related jobs. But we all know at what price - taxes on everyone.

Does Nacy and Harry have short term memory loss??? Think -- two years ago we had the biggest explosion in job gain and investment in renewable energy EVER when oil was over $120 per barrel.

Wind, Solar, geothermal, biomass, etc. new tax is not the answer, high priced oil is, which in reality is a quasi consumtion tax with the catalyst for renewed focus on alternative energy.

Jun 30 11:20 AM

[Erich J Knight:]

Dr. Hansen hates Cap & Trade also, his proposal Tax & Dividend is also endorsed by "The Economist" magazine ( you know,,,that liberal rag of a magazine :) )

74.125.95.132/search?q.../~jeh1/mailings/2008/2...

Jun 30 12:10 PM

[Windsun33:]

If you want to level the playing field, then drop all energy subsidies and see who wins.

You do realize of course that renewables - especially solar - is the single most heavily subsidized area, with the possible exception of dairy farms?


On Jun 30 09:58 AM Fred W wrote:

> Agreed...level the field and let's see what wins the "game"
> Cheap electricity might not appear soooo "cheap" if you live within

Jun 30 12:57 PM

[Windsun33:]

Uhm.. no it is not. It is more like 2% at most.

On Jun 30 10:30 AM Troy Jensen wrote:

>40% of the US's electricity is derived from....petroleum

Jun 30 01:01 PM

[jmmx:]

The whole anti-Cap-&-Trade movement is so amusing to me.

years ago when Republicans wanted cap & trade for air pollution, the Dems were skeptical but went along. Actually, it seemed to work. So now when Dems - at the initial insistence of Republicans - want to use cap & trade - all of a sudden it is a "scam" It is clear to me that so-called conservatives have no interest in coming up with solutions, they will attack anything that the Democrats say just to be contrary!

As for other areas of the world:
1- China is already making adjustments with a new huge investment in renewables,
2- At some point the developed nations will say that this cannot go on and apply some sort of disincentives for developing nations that fail to cut CO2 emissions.

As you appropriately say:
"Let's assume for the sake of argument that the "global warming" folks are right. I am not sold, but for the purpose of this discussion I'll grant the hypothesis that man is causing the planet to get warmer as a consequence of his emission of CO2 ... into the atmosphere."

If we take this as a given (if only for the sake of argument) then your position reduces to this:
"We are on a freight train headed for a cliff, there are five engines, we (and the euros) can put the brakes on two of them, but because the other three MIGHT not, then we will continue full throttle."

Not a very wise plan.

Jun 30 02:36 PM

[jmmx:]

Sorry dude - the VooDoo economics started with Reagan (remember who brought you the the S&L collapse and the Taliban?) Not very fair to say that Clinton's "Banking changes started all this" when the repeal of the Glass-Steagall act was done by republicans. To whit - from Wikipedia:


> The bill that ultimately repealed the [Glass-Steagall] Act was introduced in the Senate by Phil Gramm (Republican of Texas) and in the House of Representatives by Jim Leach (R-Iowa) in 1999. The bills were passed by Republican majorities on party lines by a 54-44 vote in the Senate[12] and by a 343-86 vote in the House of Representatives.[13] After passing both the Senate and House the bill was moved to a conference committee to work out the differences between the Senate and House versions. The final bill resolving the differences was passed in the Senate 90-8 (one not voting) and in the House: 362-57 (15 not voting). The legislation was signed into law by President Bill Clinton on November 12, 1999. [14]

The banking industry had been seeking the repeal of Glass-Steagall since at least the 1980s. In 1987 the Congressional Research Service prepared a report which explored the case for preserving Glass-Steagall and the case against preserving the act.[7]
en.wikipedia.org/wiki/...
---


On Jun 29 09:16 PM alex2 wrote:

> no phillydan Cinton started the financial crises. Do your homework
> and you can easily see how his original Banking changes started all
> this. But liberals do not care to much for truth. So I will not waste
> my time on a deaf ear.

Jun 30 02:53 PM

[jmmx:]

On Jun 30 11:14 AM Paul777 wrote:
. Gasoline
> price increases from this bill are estimated at between 25 and 77
> cents per gallon. Therefore, let's use 50 cents per gallon for this
> calculation. A working couple that each drives 25,000 miles per year
> (I drive 50,000 miles per year) in a 30 mile per gallon car will
> spend $833 more on gasoline alone!! Do the math (50,000 miles divided
> by 30 miles per gallon times 50 cents per gallon equals $833.33).
> Now add increased utility rates for electricity, increased home heating
> oil costs, increased food and product prices due to higher production
> and transportation costs, etc. and you could easily surpass $1,000
> per family in the US. What we need to stimulate the US economy during
> this time of high US unemployment and recession is lower prices and
> taxes, not higher. Cheaper energy, not more expensive.

I fail to see why gas will go up? You obviously do not believe in that basic principle of capitalism - the law of supply and demand.

If gas is $3/gal now, it is because supply and demand equal out at this price point. So it does not really matter if the government is getting 50 Cents of it or if the Oil Companies are getting that 50 cent tax. If demand goes down, so will the price. If people switch to electric cars or hybrid/etc. cars that get 40 mpg or more, then demand will go down. If investments in public transportation yield decreased use of personal autos, then demand will go down. If economics and subsidies help people switch from inefficient oil heat to solar-based, more efficient electric then demand will go down. I thought that the ONE thing that liberals and conservative do agree on is that our dependence on foreign oil undermines our national security. It seems to me that conservatives - the traditionally National Security fans - would want to promote anything that helps reduce that dependence.

So -in the end, it may well be that the cost of gasoline will actually go down.

Jun 30 03:05 PM

[Whippet:]

Keep drinkin' the Kool Aid. Chug, chug, chug. Just because we think this plan is an IDIOTIC DISASTER, and we do not bow down and worship the Anointed One, does not mean we are easily boxed "Repubs."

If you look closely at this "cap and kill" legislation, it is nothing more than an absurd power grab. The author has it right- regardless of the merit or meritlessness of AGW, this plan accomplishes zilch other than to redirect free market dollars from coal, oil, and NG to Jeff Immelt, Algore, and their bull$hitting cohorts. Wind turbines, compact fluorescents, and solar panels are just as much of an ecological disaster as fossil fuels, if you use the Sierra Club line of argument. This is a transfer payment from the demonized energy PRODUCERS to the Ivy League Egghead Alinskyite Progressive PARASITES.

Reject the Jedi Mind Tricks.


On Jun 29 08:48 PM PhillyDan wrote:

> Regarding Cap and Trade, let's set the record straight. The CBO
> has estimated that cap and trade will cost the average American family
> an additional $175.00. Hell, kids spend on more on basketball shoes
> than that amount. The DOE estimates the cost to be about $85 to
> $125. To me, this is a small price to pay for a cleaner planet.
>
>
> The author of this articles does pose reasonable concerns about the
> rest of the World. My counter argument is that this creates a wealth
> of opportunity for the United States and other countries to sell
> the solutions that we develop because of the "Cap and Trade" disincentives
> (or better yet, incentive to use cleaner energy) to these other nations.
>
>
> I view "Cap and Trade" as a free market solution not Socialism.
> Socialism is the new boogeyman for all you Repubs. Go sell your
> fear mongering elsewhere. For over 40+ years we have had an energy
> dependence problem and now a very severe environmental problem, regardless
> of the author's views and now when a reasonable solution comes along,
> it get trashed and demonized as Socialism. Left to their own devices,
> it is clear that most companies move at the pace of a very slow turtle.
> What "Cap and Trade" does is put a turbo engine up the turtle's butt.

Jun 30 03:11 PM

[Whippet:]

Partially correct. Phil Gramm was a RINO, grabbing his ankles for Wall Street. Probably called in a lot of "favors" from other bought and paid for Sens to get a piece of "innocuous" legislation Rahm-ed through. Robert Rubin (Treasury Sec) was the force behind the legislation; it landed him a cool $100 million when he left Public Service. To gripe over which party killed Glass-Steagal is silliness- the Wall Street Crime Syndicate owned (and owns) them both.


On Jun 30 02:53 PM jmmx wrote:

> Sorry dude - the VooDoo economics started with Reagan (remember who
> brought you the the S&L collapse and the Taliban?) Not very fair
> to say that Clinton's "Banking changes started all this" when the
> repeal of the Glass-Steagall act was done by republicans. To whit
> - from Wikipedia:
>

Jun 30 03:16 PM

[fran:]

POOR MADOFF--

accused and punished for SUPPOSEDLY foisting the biggest,badest ponzi ever.
his pales in the shadow of SSA[social security for those in the dark]. foisted on us by the US of A GOV'T.

people-- the incumbents are about to try a repeat FOIST on us.

Jun 30 03:57 PM

[Windsun33:]

Uhm... no. History lessons and research are your friend.

The origins of the Taliban go back to 1947 in Pakistan, however militant Taliban were almost non-existant until 1994. I don't think Reagan was around for either of those.


On Jun 30 02:53 PM jmmx wrote:

> Sorry dude - the VooDoo economics started with Reagan (remember who
> brought you the the S&L collapse and the Taliban?)

Jul 01 05:08 AM

[User 376184:]

Look at a map,or better a globe. Look out of an airplane window. The earth is barely populated what with the oceans and huge land masses where no one lives. Humans are relegated to temperate zones were they crowd in while the rest of the planet is empty. We can not possibly affect the weather.


On Jun 30 03:02 AM Denise Andra wrote:

> Environmental problems will only continue to get worse because our
> population continues to increase. More and more people are procreating
> and living longer. Will we ever stop, or even slow down? Look at
> how this affects not only us, but especially the wildlife.
>
> We have the most destructive and biggest negative impact on this
> planet. Even though controlling and reducing the human population
> would help reduce the number of cars on the road among many other
> environmental problems we've created, it is a problem that continues
> to be ignored.

Jul 01 02:53 PM

[ebworthen:]

We are worshipping ourselves, therefore, we must be omnipotent and are responsible for the climate, the moon, increased solar radiation, and zits.

Somehow, politicians can stop humans from being humans and with good intentions, vaporous hope, and tax and government/corporation extortion schemes disguesed with the euphamism "cap and trade" prevent natural cycles from occuring.

It's the most ridiculous, selfish, narcisisstic, and pointless exercise yet in our quest to pretend we are Gods.

Jul 06 09:25 AM

[ebworthen:]

It's always "For the children!" or "For the planet!" that oppressive taxation and redistribution of hard earned money to wasteful schemes and coroporations are foisted upon us.

"Daddy, do you have life insurance?" or "Save the baby (insert cute mammal here)". They play on people's emotions, guilt or compassion or narcisissm to make cold hard CA$$$H baby!

What a crock of steaming B.S. this is.

"Piece of Legislation", oy vey, run when you hear those words and hide your wallet. It's a piece of something but it's steaming and the taxpayer is going to have to scoop it.

It is precisely this kind of baseless enthusiasm for legislation and taxation and spending on windmills that do nothing but look pretty that have gotten us to the precipice of doom.

On Jun 30 10:30 AM Troy Jensen wrote:

> Hate it or love it, Cap and Trade is on the way. We can all sit here
> and just call Global Warming "A Hoaz", "A Trojan Horse for Converting
> America to Socialism".....etc etc.
>
> Realism always wins the day in my view of the economy. SO if it's
> here, and we know this Administration, as well as a growing majority
> of the country (major cultural shift going on - that type of momentum
> is impossible to stop), then let's adopt the RIGHT free-market solution...and
> take the leadership role in reducing gHg in the world, rather than
> eventually being forced into a European solution when it's too late.
>
>
> I agree, there are flaws in the bill. But it's a start. Instead of
> bashing, let's see what comes from the Senate, what is actually signed
> into law, and THEN, what actually evolves from these early stages.
>
>
> In the end, technology will indeed win the day (nice, Zenfar). I
> see it daily in my industry, truly amazing what solar and wind energy
> generation systems are in the R&D pipeline, the amount of PRIVATE
> investment into the Renewable Energy sector, and the downward pressure
> on solar and wind energy generation system component costs as manufacturing
> infrastructure ramps up, along with the flow of investment funds
> and new technologies being introduced daily.
>
> Final word - I'd advise everyone bashing this bill to really think
> about these words - National Energy Security. Whether you think global
> warming is a hoax by the granolas and socialists, there is a reality
> - there is NOTHING more critical to US National Security than reducing,
> and eventually eliminating, our dependence on a finite foreign source
> of energy, derived from the most geopolitically unstable area of
> the world. Every American should agree reducing our energy import
> levels from the Middle East must be a major priority.
>
> 40% of the US's electricity is derived from....petroleum.

Jul 06 09:37 AM