Cap and Trade

[Alluvial]

Actually I don't think that I support this bill. I'm not done reading about it yet, but ... I was considering the first definition of word "tax" given in your post.

[slang]

Originally Posted by Alluvial

Actually I don't think that I support this bill.

Too bad that Congress is going to pass it for anything short of 3 million torch and pitchfork wielding citizens storming DC.

[Alluvial]

I can't figure out what it is supposed to accomplish (besides the obvious, lower carbon emissions). Is it supposed to force industry to change to "green" energy sources?

I recieved a message from the Mississippi Manufacturers Assn. which says "Because Mississippi cannot utilize some of the alternative energy sources, this legislation will have a disproportionately negative effect on our state." I'm not real sure, but I think this means that our industries don't lend themselves to "green" energy sources. Is this going to be like the bricklayers going out of business when poured concrete came on the scene?

Oh yeah, I haz a pitchfork ... somewhere around here ...

[slang]

Originally Posted by Alluvial

I can't figure out what it is supposed to accomplish

1. To make the Feds richer than they'd ever dreamed possible.

2. To give the Feds control that they'd only dreamed possible.

3. To kill the economy flat, then build it back to a progressive utopia of socialism that it was truly intended to be. To give back Americas wealth to it's rightful owners.

What else would you like clarification on?

[Alluvial]

Seriously, though. What's the intent that they put on paper, the justification?

[TheMercenary]

Originally Posted by Alluvial

Seriously, though. What's the intent that they put on paper, the justification?

They have benchmarks for reducing carbon emissions. 2020 and 2050. The plan is to curb greenhouse gas emissions and create an energy-efficient economy. It is all smoke and mirrors which will cost billions of dollars and have little to no effect on the environment. One of the biggest failure, and I have mentioned this numerous times, is that the other countries in the world are doing nothing, China and India have no such constraints and are not particpating in any such Cap and Trade regulations. Europe has no such regulations which use this process. They will continue with unregulated growth to secure their economic futures. We, on the otherhand will be spending billions if not trillions. And guess what, you are going to pay for it.

[TheMercenary]

The 1,200 page bill -- formally known as the "American Clean Energy and Security Act" -- will reach into almost every corner of the U.S. economy. By putting a price on emissions of greenhouse gases, such as carbon dioxide, the bill would affect the way electricity is generated, how homes and offices are designed, how foreign trade is conducted and how much Americans pay to drive cars or to heat their homes.

http://online.wsj.com/article/SB124610499176664899.html

[Alluvial]

Originally Posted by TheMercenary

They have benchmarks for reducing carbon emissions. 2020 and 2050. The plan is to curb greenhouse gas emissions and create an energy-efficient economy.

Please forgive my ignorance, and thanks for your post. So, the regulations are going to tighten down on the emissions. Is that supposed to have two effects: one being reduced emissions and the other being industry seeking out other energy sources?

I'm wondering if this is supposed to be like carrot-and-stick without the carrot. Are we going to beat Big Industry until it switches to green energy? I just can't quite wrap my head around the logic (maybe there isn't any).

I've read the arguments about China et. al. and I certainly see the point. Isn't that what has played out already ... for example, some other countries don't have the strict environmental rules that the US does, so their products are cheaper?

I don't think we need to be totally lax about environmental issues but I think this is a bad bill, for several reasons.

I swear, just when you think one party is more st00pid than the other, they up and surprise ya.

ETA: yeah, I understood the part about the cost working its way down to the consumer.

[TheMercenary]

The money goes where???????????

Section 201: National Energy Efficiency Building Codes

Section 201 of the Waxman-Markey Act calls for the development and adoption by state and local governments of a national energy efficiency code. A summary of the main provisions are as follows:

1. Establishes a “national energy efficiency building code” for residential and commercial buildings, sufficient to meet each of the national building code energy efficiency targets.

2. Sets energy efficiency targets for the national building code: “on the date of enactment of the American Clean Energy and Security Act of 2009, 30 percent reduction in energy use relative to a comparable building constructed in compliance with the baseline code…effective January 1, 2014, for residential buildings, and January 1, 2015, for commercial buildings, 50 percent reduction in energy use relative to the baseline code; and…January 1, 2017, for residential buildings, and January 1, 2018, for commercial buildings, and every 3 years thereafter, respectively, through January 1, 2029, and January 1, 2030, 5 percent additional reduction in energy use relative to the baseline code.”

3. If consensus based codes provides for greater reduction in energy use than is required under the ACESA, the overall percentage reduction in energy use provided by that successor code shall be the national building code energy efficiency target.

4. Requires that states and local governments comply with or exceed the national energy efficiency building code, and provides for enforcement mechanisms for states which are out of compliance.

The federalization of building codes has the potential to save consumers large amounts of money on their energy bills by enhancing the energy efficiency of buildings nationwide, as well as addressing the 38 percent of carbon emissions generated by buildings in a comprehensive manner. On the other hand, it represents a major shift in the balance of power over building and land use regulation. Traditionally, building codes, like almost all land use regulation in the United States has been a local (in some cases, state) issue. This makes for a patchwork of different codes across the nation. Indeed, thirteen states have no statewide commercial building codes, and fourteen states have no statewide residential building code.

Proponents of local control of regulatory authority argue that local government can more appropriately respond to local conditions and can experiment more freely with different types of regulations than would be possible at the federal level. On the other hand, federal control of building codes provide uniformity across the country for a problem which does not respect state and local borders, prevents local challenges to individual energy efficiency efforts (like AHRI v. City of Albuquerque) and, given the large number of states which do not have a current building code at all, provides more effective regulation of this important source of carbon emissions.

Section 131, 132: SEED funds

According to analysis completed by the American Council for an Energy-Efficient Economy,

"allocations detailed in Section 782g direct 9.5 percent of allowances in 2012 (and decreasing amounts thereafter) to go into a State Energy and Environmental Development (SEED) account to be used by state and local governments for efficiency and renewables projects."


The allocation of SEED money will be at the discretion of local and state authorities.

One of the programs that can be funded by these allocation are Property Assessed Clean Energy (PACE) Bonds. PACE bonds involve loans to commercial and residential property owners to finance energy retrofits. Through the interest generated on these bonds, a revolving fund is established to allow for even more retrofits to occur. Already, California and Missouri have announced plans to use funding from the Department of Energy State Energy Program to establish PACE bond programs. Look for more states to jump on the PACE bond bandwagon and use cap-and-trade revenue to fund similar programs.

Section 202: REEP Program

With the American Recovery and Reinvestment Act, the Department of Energy’s State Energy Program received billons of dollars. Under the Waxman-Markey bill, the State Energy Program will again receive billions of dollars for more energy efficiency retrofits. From the Pew Center on Climate Change (PDF):

"This section requires the Secretary of Energy to develop a Retrofit for Energy and Environmental Performance (REEP) program to facilitate building retrofit programs for energy efficiency and efficient water use. Funding will be made available through REEP to the State Energy Programs for state and local efforts, including audits, incentives, technical assistance, and training. States are permitted to choose funding mechanisms, with options including credit support, such as interest rate subsidies or credit enhancement, providing initial capital, and allocating funds for utility programs."


The REEP program has not been created yet so it is unclear what the program will look like. Based on the DOE’s previous support for PACE bond programs when allocating ARRA funds, don’t be surprised to see even more of these programs established through REEP.

Green Act: H.R. 2336—Amendment to Waxman-Markey

On May 7, 2009, Rep. Ed Perlmutter (D-Colorado) introduced H.R. 2336, the Green Resources for Energy Efficient Neighborhoods Act of 2009 (“GREEN ACT”). According to Perlmutter’s office, “The GREEN Act provides incentives to lenders and financial institutions to provide lower interest loans and other benefits to consumers, who build, buy or remodel their homes and businesses to improve their energy efficiency and use of alternative energy.”

In essence, the Act:

1. Encourages energy efficiency in HUD housing by offering block grants and credit for energy improvements in the underwriting of mortgages;

2. Provides that Fannie Mae and Freddie Mac will have a duty to serve very low, low and moderate income communities while developing underwriting standards to facilitate a secondary market for energy-efficient and location efficient mortgages;

3. Requires federal banking regulators to establish incentives for the development and maintenance of “green banking centers” for the purpose of providing information to customers seeking information about acquiring green mortgages.

Interestingly, Perlmutter’s GREEN Act passed the full House of Representatives as part of HR 6899, the Comprehensive Energy Security and Consumer Protection Act in September 2008, but the Senate failed to take action on this legislation. The GREEN ACT was added this morning {at 3am} to the manager's amendment to the Waxman-Markey bill.

http://www.reuters.com/article/gwmBu...73327920090626

[TheMercenary]

Originally Posted by Alluvial

Please forgive my ignorance, and thanks for your post. So, the regulations are going to tighten down on the emissions. Is that supposed to have two effects: one being reduced emissions and the other being industry seeking out other energy sources?

I'm wondering if this is supposed to be like carrot-and-stick without the carrot. Are we going to beat Big Industry until it switches to green energy? I just can't quite wrap my head around the logic (maybe there isn't any).

I've read the arguments about China et. al. and I certainly see the point. Isn't that what has played out already ... for example, some other countries don't have the strict environmental rules that the US does, so their products are cheaper?

I don't think we need to be totally lax about environmental issues but I think this is a bad bill, for several reasons.

I swear, just when you think one party is more st00pid than the other, they up and surprise ya.

ETA: yeah, I understood the part about the cost working its way down to the consumer.

It allows companies who have lots of money to buy the abiltiy to pollute more from companies who have less money and pollution credits.

I certainly support the investment and encouragement of green energy and renewable sources. But right now they are not really fully developed. I would rather put more money into the research than hammering industry and the consumer with taxes to force compliance.

[Alluvial]

Hmm. They go to tacking too many amendments on it, and the thing will die. Hopefully.

Where is your above info from? I'd like to read that article.

[TheMercenary]

In a cap-and-trade program, the government determines which facilities or emissions are covered by the program and sets an overall emission target, or “cap,” for covered entities. This cap is the sum of all allowed emissions from all included facilities.
Once the cap has been set and covered entities specified, tradable emissions allowances (rights to emit) are distributed (either auctioned, or freely allocated, or some combination of these). Each allowance authorizes the release of a specified amount of greenhouse gas emissions, generally one ton of carbon
dioxide equivalent (CO2e).1 The total number of allowances is equivalent to the overall emissions cap (e.g., if a cap of one million tons of emissions is set, one million one-ton allowances will be issued). Covered entities must submit allowances equivalent
to the level of emissions for which they are responsible at the end of each of the program’s compliance periods.
Allowance trading occurs because firms face different costs for reducing emissions. For some emitters, implementing new, low-emitting technologies may be relatively inexpensive.
Those firms will either buy fewer allowances or sell their surplus allowances to firms that face higher emission control costs. Since a ton of carbon dioxide (CO2) emitted from one source has the same warming effect as a ton emitted from any other, the location of a given emissions reduction does not matter. By giving firms a financial incentive to control emissions
and the flexibility to determine how and when emissions will be reduced, the capped level of emissions is achieved in a manner that minimizes overall program costs.

http://www.pewclimate.org/docUploads/Cap&Trade.pdf

[Alluvial]

Thanks.

[TheMercenary]

Potential Pitfalls of Cap and Trade:

Advocates of the system like it because "the polluter pays." Setting aside for the moment the question of whether it is justifiable to call carbon dioxide a pollutant, [b]companies of course do not simply absorb these extra costs. Instead, they pass them on to their customers who are also, by and large, taxpayers. Not only does the taxpayer carry the cost of any cap and trade scheme, but their money also provides profit for a whole new industry: the new carbon trading sector, the middlemen who make the system work.[b/]

Unlike normal tradable commodities, carbon dioxide emissions can only be estimated, rather than quantified exactly. And it is only international agreements and national law that give these permits a price at all. The result is a system open to misuse, since all parties -- seller, middleman and buyer -- have an incentive and opportunity to manipulate the estimates. Sellers want to show how much they are reducing their emissions, buyers benefit from lower prices as more units come to market, and traders do good business in a buoyant market.

The biggest abuse began right at the start of the ETS when regulators handed out too many free permits. As a result, utilities companies made windfall profits by simply selling on large numbers of unneeded credits and not passing the savings on to their customers in the form of price cuts. Despite the EU's declared goal to dole out permits based on objective criteria, industry lobbying led to an overallocation. When push comes to shove, governments will always protect their national champions. The German government, for example, negotiated an easing of planned caps on emissions from cars to the advantage of manufacturers of higher-powered cars such as Mercedes-Benz and Porsche.

And this is in a bloc where the environmentalists have far more influence than in America. Translated across the Atlantic, any climate change bill will become the subject of the worst kind of pork-barrel politics riddled with loopholes for key industries before it becomes law.

This is already evident in the attitude of a significant number of Democratic Congressmen. Rather than back the bill, as many had assumed, they are looking for changes to protect powerful interests (and their own votes) in their constituencies. States with strong coal mining sectors are particularly vulnerable to cap and trade legislation, and, in the words of Democratic Representative Dennis Cardoza from California "the EPA under President Obama "doesn't get rural America." His Democratic colleague Tim Holden "I have grave concerns about where the administration is going on climate change."

There is another major problem with cap and trade: its lack of predictability. Prices vary considerably. On June 15, the right to emit a tonne of carbon dioxide cost €12.50. Since the inception of the ETS, this price has varied from below €10 to peaks of more than €30. While these fluctuations may encourage businesses to increase energy efficiency -- for which they will in any case receive a direct financial benefit -- it is of no help for long-term investment decisions to permanently reduce carbon emissions. For this, a significantly higher minimum price is needed, perhaps about $140 per tonne, according to a U.K. government-sponsored report from Cambridge university, due to be published shortly.

Given the system's inherent flaws, it comes as little surprise that the ETS didn't quite work as intended. According to European Commission figures, emissions from the 27 member states rose by 1.9% in the first three years of the regime. Following criticism, the caps for the period to 2012 were reduced for the majority of member states, but only to a little lower than actual emissions in 2005, and the evidence is that the recession is having a much more direct impact on emissions than the trading scheme (incidentally putting a lot of low-priced permits on the market).

Despite the system's questionable results, the costs are considerable. In 2006, individual business and sectors had to pay €24.9 billion for over one billion tones' worth of permits. The WorldWatch Institute estimates that the costs of running a trading system designed to meet the EU's Kyoto obligations at about $5 billion. The estimated costs of a trading system to meet the EU's own and far more demanding commitments of a 20% reduction (against a 1990 baseline) by 2020 are around $80 billion annually.

Substantial changes are planned for the European regime, with emissions caps to be set by a single EU body rather than national governments, more than half of permits to be auctioned, and the aviation sector and possibly shipping to be included. Household consumption and private transport cannot be included in the ETS as set up, although the idea of extending the concept to the allocation of personal carbon allowances is popular with some.

But these are only cosmetic changes to an inherently flawed system. The auctioning of permits may avoid overallocation but instead saddle industry with huge upfront costs. The entire scheme will remain vulnerable to political interference and thus likely fail to reduce carbon emissions. The only certainty is that it will hurt the economy and drive up energy costs.

If passed, the U.S. bill will probably commit to the headline figure of a 17% reduction (from a 2005 baseline) in carbon dioxide emissions by 2020. Before signing any bill which would reduce America's competitiveness for little real impact on emissions, President Obama may want to heed the warning of Europe's experience.

http://online.wsj.com/article/SB124587942001349765.html

[TheMercenary]

This sums it up quite nicely.

Cap and Trade; Big government is on a roll.

The "climate change" bill or "cap and trade" legislation that recently passed the house will establish emissions standards for major industrial operations like utilities and manufacturers. Companies will have to purchase emissions credits to cover any excess over and above those standards. Revenue from the sale of credits will go partially to subsidize energy costs for the poor.

Here's the dilemma. If the program's stated intent is successful, and ten or twenty years from now we actually have an energy source that is comparable in cost, or even slightly higher than fossil fuels, with zero carbon emissions, subsidy money goes away. No emissions means no need to buy credits. No credits. No revenue. Something else will have to be taxed because politicians are not going to take back an entitlement, once it's been established.

This is not just bad policy from a free market standpoint. It's another opportunity for the government to create a pool of money for it to control. Just as TARP has become a revolving line of credit for the "too big to fail", the new energy subsidies will be permanent, even if their initial source of revenue goes away.

The new strategy for implementing big government is not to necessarily take control of individual industries. It's much more efficient to take control of the overall cash flow through the system. The tools are targeted taxes and credits, geographical monopoly licenses, government loans and equity purchases, creating a federal "risk manager" and subsidies for things like health insurance, housing, food and energy. Businesses become more and more dependent on the government to engage in trade and consumers become more dependent on the government for the most basic of necessities. Big government makes itself the biggest of the "too big to fail".

The Soviet Union tried this strategy. It didn't work out too well in the long run. China has fared a bit better. I guess that's where big government proponents get their inspiration. It remains to be seen whether Americans can be corralled as effectively as the Chinese. This is not a competition between capitalism and socialism. Capitalism has been taken off the table. This is a demonstration of global socialism. Perhaps something we have to witness play out before we can get back on the right road.

http://www.examiner.com/x-1087-Denve...t-is-on-a-roll