Cap and Trade bill

[Gan]

After lawmakers consumed all of Monday afternoon with opening statements, debate over a bill that would cap U.S. greenhouse gas emissions finally got underway in a House committee yesterday.
But it has not gotten far.

The Energy and Commerce Committee spent its first eight hours yesterday considering six amendments to the mammoth bill, which would create a "cap-and-trade" system that forces polluters to amass credits equal to their emissions.

That leaves a lot of work to do, if the committee is to meet Chairman Henry A. Waxman (http://projects.washingtonpost.com/congress/members/w000215/)'s goal of passing the bill out of the committee by the end of the week. Rep. Joe Barton (http://projects.washingtonpost.com/congress/members/b000213/) (Tex.), the ranking Republican, said his side could submit as many as 400 amendments.

The bill -- named for Waxman (D-Calif.) and its other chief sponsor, Rep. Edward J. Markey (http://projects.washingtonpost.com/congress/members/m000133/) (D-Mass.) -- proposes to reduce emissions by imposing a national limit, or cap, on greenhouse gases. It would then allow polluters to buy and sell their emissions credits. If a polluter, for instance, emitted less than its allotment, it could sell the excess.

In general, Democrats have praised the bill as a long-overdue solution to the problem of climate change. Republicans said that it would add both cost and complications to electricity, gasoline and other sources of fossil-fuel energy. One Republican said the bill would lead to a "permanent recession."

Yesterday, the committee approved an amendment that would create a "Clean Energy Deployment Administration," to provide loans and loan guarantees to companies investing in renewable energy. The bill also mandates that a certain percentage of electricity come from renewable sources by 2020. The committee shot down a proposal to count wood taken from mature forests on federal land as a kind of "renewable biomass," an approved source of clean power.

Some of the day's most pointed debate came in response to an "off-ramp" suggested by Rep. Mike Rogers (http://projects.washingtonpost.com/congress/members/r000575/) (R-Mich.). That amendment would have allowed the federal government to get out of the cap-and-trade plan if India and China -- two of the world's biggest sources of greenhouse gases -- did not agree to similar limits.

Rogers said that, without this provision, heavy-polluting U.S. plants could relocate to one of those countries.

"Do not eliminate our middle class and send it to China and India," he said.
Democrats retorted that the bill has provisions to protect these industries from overseas competition.

"We shouldn't say we're going to shoot ourselves in the head just because India and China won't do what we want them to do," Waxman said. The amendment was defeated on a party-line vote, 36 to 23.

http://www.washingtonpost.com/wp-dyn/content/article/2009/05/19/AR2009051903177_pf.html
as posted on RCP
__________________________________________________ _________

I'm watching this one closely because I actually agree with the idea in its pure form. The only caveats are:

It will probably be so fucked up with amendments and loopholes by the time it makes it through Congress that it wont be worth the trees it killed to be printed on.
I see the focus to be utility plants (electricity/coal/etc.). What other large polluting plants would it push out of the US to other pollution willing nations? And how will that impact our blue collar labor dynamic?
How futile will this effort be if other industrial countries dont follow suit?I like the idea that a market can be created where pollution credits must be used/purchased in order for less efficient producers to maintain production at a cost (meaning a cost to pricing competitiveness) and where more efficient producers can profit from selling unused credits while enjoying pricing competitiveness with the newly market created equilibrium. It will mean higher utility costs overall (I dont know how much), but I think the benefit is worth the cost.

Discuss.

[Back]

I'm watching this one closely because I actually agree with the idea in its pure form. The only caveats are:

It will probably be so fucked up with amendments and loopholes by the time it makes it through Congress that it wont be worth the trees it killed to be printed on.
I see the focus to be utility plants (electricity/coal/etc.). What other large polluting plants would it push out of the US to other pollution willing nations? And how will that impact our blue collar labor dynamic?
How futile will this effort be if other industrial countries dont follow suit?I like the idea that a market can be created where pollution credits must be used/purchased in order for less efficient producers to maintain production at a cost (meaning a cost to pricing competitiveness) and where more efficient producers can profit from selling unused credits while enjoying pricing competitiveness with the newly market created equilibrium. It will mean higher utility costs overall (I dont know how much), but I think the benefit is worth the cost.

Discuss.

I agree with you for the most part. But even I feel that a reward/punishment system from the government over industry regarding pollution is sad. Sad in that some industries would be dumping mercury into the ocean and sulfur into the atmosphere thinking “man can’t harm the planet”.

Guess what? If I dumped a bucket of rat poison upstream every day for a year what the fuck do you think is going to happen down stream?

Anyway, preachiness over, I guess the government needs to step in and I approve.

[Apotheosis]

Generally a spike in energy prices leads to deep recession... all companies are going to do is pass the bill on to the consumer by raising prices, etc..

cap and trade is nothing more than a stealth tax that will do more to harm the economy than save the environment.


How many of those politicians are going to be making $$$ based on this legislature? Al Gore being one of them

[Gan]

Generally a spike in energy prices leads to deep recession... all companies are going to do is pass the bill on to the consumer by raising prices, etc..

Granted that passthrough costs will occur, do you think that more efficient domestic producers will be more competitive (able to charge less) than inefficient domestic producers who have to pay more for production?

So if the consumer can still pay a realistically competitive price and benefit from a cleaner environment - is that not a win/win?

[MrTastyHead]

It makes no difference at all. Companies will still pollute, the rich will still get richer, the poor and the planet will suffer.

But maybe I'm jaded.

[Bhuryn]

I'm so torn on this. On one hand a zero-sum system of sorts might help reduce over all pollution. On the other hand, I'm concerned that this is going make it tough on the smaller companies. We don't need another ag subsidies program.

[Nieninque]

http://www.env-econ.net/images/2007/05/22/envecon.jpg

[Jack]

Gan,
You live in Houston too, so you know how bad the electric bills can get in the summer. You can't just go without AC around here, and depending on your plan and provider, you're looking at paying anywhere from 11 to 18 cents per kilowatt hour. The average consumer uses about 1100 kilowatt hours per month in Houston. Summer months make that more like 1500, and in a larger house it can be as much as 4000 just to keep the home at a livable temperature. All this bill will do is rase those rates to something like 20-30 cents per kilowatt hour. Your energy consumption won't change, your power bill will just go up. Yay?

[Bhuryn]

I live in fort worth, it gets equally bad here. If you own your house there is a pretty substantial (up to $3500 I think) tax credit for replacing windows. I think there might be one for solar barriers as well. It'll do a number on those $400 energy bills.

[Apotheosis]

http://www.env-econ.net/images/2007/05/22/envecon.jpg

Awesome

[Back]

Gan,
You live in Houston too, so you know how bad the electric bills can get in the summer. You can't just go without AC around here, and depending on your plan and provider, you're looking at paying anywhere from 11 to 18 cents per kilowatt hour. The average consumer uses about 1100 kilowatt hours per month in Houston. Summer months make that more like 1500, and in a larger house it can be as much as 4000 just to keep the home at a livable temperature. All this bill will do is rase those rates to something like 20-30 cents per kilowatt hour. Your energy consumption won't change, your power bill will just go up. Yay?

I’ve lived in Houston and I call bullshit that AC is a necessity. Unless you are elderly and or incapacitated.

[Parkbandit]

As the scientific community becomes increasingly skeptical of claims that global warming is manmade and portends a crisis, government calls for carbon dioxide (CO2) cap-and-trade systems are premature at best and economically disastrous at worst.

Far from being a dangerous pollutant, carbon is a basic component of all living cells, and life on Earth actually depends on carbon dioxide. In fact, increased CO2 concentrations make plants grow faster and bigger and provide improved food chain conditions for humans and animals. It would be criminal to classify such an essential and beneficial resource as a pollutant.

Besides being based on bad science, CO2 cap-and-trade systems threaten the nation's economy and citizens' financial well-being. A cap on energy production amounts to a tax on all goods and services. Multiple studies have found that a modest cap-and-trade system to limit carbon emissions according to Kyoto Protocol measures (7 percent below 1990 levels) would reduce domestic economic growth by almost 2 percent per year, increase gasoline prices by 53 percent, and raise other energy prices by 86 percent.

If the nation were to adopt Al Gore's desired 90 percent reduction in carbon dioxide emissions, the resulting energy scarcity and price inflation would simply destroy the economy.

All that sacrifice would likely be for nothing. When a cap-and-trade system was implemented in the European Union, emissions actually rose by a greater percentage than in the United States. Cap-and-trade systems are notoriously difficult to enforce, and many politically connected companies in Europe have been found to be fudging the numbers and selling "unused" credits without actually reducing emissions. Europe's carbon cap-and-trade systems are permeated by fraud.

In a cap-and-trade system, government essentially takes ownership of all CO2 emissions and distributes "carbon credits" to the private sector. Politicizing energy distribution and usage through cap-and-trade systems is a great way to reward politically connected energy producers at the expense of the general population, the energy consumers.

http://www.heartland.org/policybot/results/23049/CapandTrade.html

[Parkbandit]

I’ve lived in Houston and I call bullshit that AC is a necessity. Unless you are elderly and or incapacitated.

Most people don't like to sit around in their own ball soup like you do.

[Back]

Most people don't like to sit around in their own ball soup like you do.

Jealous? Evolve.

Seriously, that so called “article” you just posted is ClydeR worthy ridiculous.

[Parkbandit]

Jealous? Evolve.

When you are evolved like you, your balls don't sweat? Or is it you simply don't have balls?



Seriously, that so called “article” you just posted is ClydeR worthy ridiculous.

Feel free to refute the information provided. Hopefully, it will be better than your last "OMG BUSH DESTROYED THE ECONOMY!" and when called out for specifics, you bowed out.

[Gan]

Gan,
You live in Houston too, so you know how bad the electric bills can get in the summer. You can't just go without AC around here, and depending on your plan and provider, you're looking at paying anywhere from 11 to 18 cents per kilowatt hour. The average consumer uses about 1100 kilowatt hours per month in Houston. Summer months make that more like 1500, and in a larger house it can be as much as 4000 just to keep the home at a livable temperature. All this bill will do is rase those rates to something like 20-30 cents per kilowatt hour. Your energy consumption won't change, your power bill will just go up. Yay?
The key question is how much will it go up? More than people will be willing to pay (pricing themselves out of the market)? I can see this hurting the poor, which would call for some sort of government subsidy (yay :( ). Are there already producers that can work within a cap/trade framework that would keep the average price from spiking upwards? Since this market is deregulated how will distributors affect the end pricing other than through pass-through pricing? And will the government still maintain current tax levels or will they revise them since this system will have negative impact on pricing. I can definately see the middle-class demographic in warmer regions getting stuck with the bill, not to mention how will this affect regions where there are not huge numbers of producers to bring down average pricing?

Originally I saw this as an opportunity to clean up some of the industry's worst polluters by forcing them to upgrade to cleaner technology while incentivizing the market participants who are more efficient to remain efficient. However, the more I look at the outlying affectors the more I'm starting to be convinced that it will have a hugely negative impact on pricing across more than just the energy/utility industry. It will also have a huge impact on oil/gas refining and will further inflate already volitile prices at a time when our economic instability can not handle it.

So I'm going to reverse course here and say that while I like the idea of cleaning up reluctant industry polluters (and with the stupid idea that this could be passed in an actual working form by Congress) - our economy can not handle a cap/trade system right now due to already existing upward pressures on prices/inflation. This would be something best pursued in a period of market/economic expansion when unemployment and inflation risks are less than what they are right now, IMO.


I’ve lived in Houston and I call bullshit that AC is a necessity. Unless you are elderly and or incapacitated.
I disagree. High temperatures added with high humidity can have a large impact on health here, especially among the poor demographic.


Most people don't like to sit around in their own ball soup like you do.
This made me laugh out loud and throw up a little in my mouth at the same time.

Backlash soup. Imagine what the flavor was when he gave up bathing (washing hair?) over several months... :lol:

[Parkbandit]

As the Senate opens debate on its mammoth carbon regulation program this week, the phrase of the hour is "cap and trade." This sounds innocuous enough. But anyone who looks at the legislative details will quickly see that a better description is cap and spend. This is easily the largest income redistribution scheme since the income tax.

Sponsored by Joe Lieberman and John Warner, the bill would put a cap on carbon emissions that gets lowered every year. But to ease the pain and allow for economic adjustment, the bill would dole out "allowances" under the cap that would stand for the right to emit greenhouse gases. Senator Barbara Boxer has introduced a package of manager's amendments that mandates total carbon reductions of 66% by 2050, while earmarking the allowances.

When cap and trade has been used in the past, such as to reduce acid rain, the allowances were usually distributed for free. A major difference this time is that the allowances will be auctioned off to covered businesses, which means imposing an upfront tax before the trade half of cap and trade even begins. It also means a gigantic revenue windfall for Congress.

Ms. Boxer expects to scoop up auction revenues of some $3.32 trillion by 2050. Yes, that's trillion. Her friends in Congress are already salivating over this new pot of gold. The way Congress works, the most vicious floor fights won't be over whether this is a useful tax to create, but over who gets what portion of the spoils. In a conference call with reporters last Thursday, Massachusetts Senator John Kerry explained that he was disturbed by the effects of global warming on "crustaceans" and so would be pursuing changes to ensure that New England lobsters benefit from some of the loot.

Of course most of the money will go to human constituencies, especially those with the most political clout. In the Boxer plan, revenues are allocated down to the last dime over the next half-century. Thus $802 billion would go for "relief" for low-income taxpayers, to offset the higher cost of lighting homes or driving cars. Ms. Boxer will judge if you earn too much to qualify.

There's also $190 billion to fund training for "green-collar jobs," which are supposed to replace the jobs that will be lost in carbon-emitting industries. Another $288 billion would go to "wildlife adaptation," whatever that means, and another $237 billion to the states for the same goal. Some $342 billion would be spent on international aid, $171 billion for mass transit, and untold billions for alternative energy and research – and we're just starting.

Ms. Boxer would only auction about half of the carbon allowances; she reserves the rest for politically favored supplicants. These groups might be Indian tribes (big campaign donors!), or states rewarded for "taking the lead" on emissions reductions like Ms. Boxer's California. Those lucky winners would be able to sell those allowances for cash. The Senator estimates that the value of the handouts totals $3.42 trillion. For those keeping track, that's more than $6.7 trillion in revenue handouts so far.

The bill also tries to buy off businesses that might otherwise try to defeat the legislation. Thus carbon-heavy manufacturers like steel and cement will get $213 billion "to help them adjust," while fossil-fuel utilities will get $307 billion in "transition assistance." No less than $34 billion is headed to oil refiners. Given that all of these folks have powerful Senate friends, they will probably extract a larger ransom if cap and trade ever does become law.

If Congress is really going to impose this carbon tax in the name of saving mankind, the least it should do is forego all of this political largesse. In return for this new tax, Congress should cut taxes elsewhere to make the bill revenue neutral. A "tax swap" would offset the deadweight taxes that impede growth and reduce employment. All the more so because even the cap-and-trade friendly Environmental Protection Agency estimates that the bill would reduce GDP between $1 trillion and $2.8 trillion by 2050.

Most liberal economists favor using the money to reduce the payroll tax. That has the disadvantage politically of adding Social Security into the debate. A cleaner tax swap would compensate for the new tax on business by cutting taxes on investment – such as slashing the 35% U.S. corporate rate that is the second highest in the developed world. Then there's the 2001 and 2003 tax cuts, which are set to expire in 2010 and would raise the overall tax burden by $2.8 trillion over the next decade. Democrats who want to raise taxes on capital gains and dividends are proposing a double tax wallop by embracing Warner-Lieberman-Boxer.

All of this helps explain why so many in Congress are so enamored of "doing something" about global warming. They would lay claim to a vast new chunk of the private economy and enhance their own political power.

http://online.wsj.com/article/SB121236237789236363.html?mod=opinion_main_review_ and_outlooks

[Gan]

:(

[Kembal]

Backlash: You're a fucking tool if you believe you can live in Houston without A/C. It was 86 degrees here yesterday and it's not even June.

As for cap and trade, it makes a hell of a lot more sense than a straight carbon tax. And PB's last article is incorrect: the plan is to have (for at least the first few years) the majority of the permits be freely given, just like the system for acid rain. (which has worked really well.)

The only problem that I've read so far is that they give only 2% of the available permits to oil refiners...that needs to be higher at the outset.

[Back]

Backlash: You're a fucking tool if you believe you can live in Houston without A/C. It was 86 degrees here yesterday and it's not even June.

AC is not a necessity. Fucking move.

[Parkbandit]

Backlash: You're a fucking tool if you believe you can live in Houston without A/C. It was 86 degrees here yesterday and it's not even June.

As for cap and trade, it makes a hell of a lot more sense than a straight carbon tax. And PB's last article is incorrect: the plan is to have (for at least the first few years) the majority of the permits be freely given, just like the system for acid rain. (which has worked really well.)

The only problem that I've read so far is that they give only 2% of the available permits to oil refiners...that needs to be higher at the outset.
How exactly has it worked really well in regards to acid rain? And politics is all about power and wealth... If you think they will give that away freely, you haven't been paying attention.

[Kembal]

AC is not a necessity. Fucking move.

I see. So 4 million people should just up and move out to somewhere else because you believe that they should not have air conditioning in their houses?

There's no ideological definition to that. It's just plain idiocy.

[Kembal]

How exactly has it worked really well in regards to acid rain? And politics is all about power and wealth... If you think they will give that away freely, you haven't been paying attention.

I'll post a couple of links that I've not fully read because I've got to get back to working on these financial projections, but I think they give a pretty good analysis:

http://www.edf.org/page.cfm?tagID=1085 - Environmental Defense Fund writeup

http://www.epa.gov/airmarkt/cap-trade/docs/ctresults.pdf - Environmental Protection Agency writeup

There's a lot more if you search with "acid rain cap and trade" as the search term.

As to your second point: Of course...politics is about power and wealth. The various elites in the country (regardless of political ideology) stand to use the political system on a general basis in order to concentrate power and wealth further in their hands with as little cost to them as possible. In this case, the corporate elite that make up the affected industries have been able to prevail upon lawmakers to give most of those permits freely instead of at auction.

Do I mind in this instance? No...it gets the system to work, which is what matters more. And it'll help keep prices down from the system for the next few years.

[Parkbandit]

I'll post a couple of links that I've not fully read because I've got to get back to working on these financial projections, but I think they give a pretty good analysis:

http://www.edf.org/page.cfm?tagID=1085 - Environmental Defense Fund writeup

http://www.epa.gov/airmarkt/cap-trade/docs/ctresults.pdf - Environmental Protection Agency writeup

There's a lot more if you search with "acid rain cap and trade" as the search term.

As to your second point: Of course...politics is about power and wealth. The various elites in the country (regardless of political ideology) stand to use the political system on a general basis in order to concentrate power and wealth further in their hands with as little cost to them as possible. In this case, the corporate elite that make up the affected industries have been able to prevail upon lawmakers to give most of those permits freely instead of at auction.

Do I mind in this instance? No...it gets the system to work, which is what matters more. And it'll help keep prices down from the system for the next few years.

I'll have to read through those, thanks for linking them.

As far as your belief that this system works.. it hasn't worked so far in Europe. Companies are using the same mindset as people like Gore are.. 'Sure I pollute, but I'm carbon neutral because I bought some carbon credits.. so it's all good'. The "guilt" of being a polluter is simply purchased away.. so the lifestyle never changes.

[TheWitch]

I have a couple (potentially stupid) questions, that I've failed to answer for myself reading up on this:

First, why are they making this so complicated? It seems to me that the goal of actually reducing the amount of pollution won't actually happen, the manufacturing processes that pollute will now just have to pay to do it, passing that expense on to consumers.

Why aren't they instead looking at a similar thing to the national car immisions standards, where a baseline is set by industry and goals established for actual reduction in pollutants by a certain date, or staggered goals of a percentage reduction by 2012, another percentage reduction by 2016 and etc? If that date comes and goes and the standard has not been met, then impose fines. Or is that too simple..?

And second, are these billions of dollars included in the Obama's beached whale of deficit spending three generations worth of money in the next four years budget? Or is this yet more liberal incremental spending of money we don't have?

[Parkbandit]

I have a couple (potentially stupid) questions, that I've failed to answer for myself reading up on this:

First, why are they making this so complicated? It seems to me that the goal of actually reducing the amount of pollution won't actually happen, the manufacturing processes that pollute will now just have to pay to do it, passing that expense on to consumers.

Because Government is creating it. And that is exactly it.. the companies that it's supposed to affect and correct behavior is doing nothing but passing along the expense to the consumer. I've talked to a couple friends in our local energy company and they said they really don't care one way or another about the proposed Cap and Trade legislation because it really won't affect them much at all. The additional costs associated with it will simply be passed onto the consumer, so the net financial affect on them is exactly zero.



Why aren't they instead looking at a similar thing to the national car immisions standards, where a baseline is set by industry and goals established for actual reduction in pollutants by a certain date, or staggered goals of a percentage reduction by 2012, another percentage reduction by 2016 and etc? If that date comes and goes and the standard has not been met, then impose fines. Or is that too simple..?

Because car emissions are something you can compare to each other. A 4 door sedan that has X amount of emissions can equal another 4 door sedan's. Companies on the other hand, have far greater variances depending on how big they are, what they are producing, where they are producing it, etc... it's like comparing apples to hubcaps.



And second, are these billions of dollars included in the Obama's beached whale of deficit spending three generations worth of money in the next four years budget? Or is this yet more liberal incremental spending of money we don't have?

In a perfect world, it would only cost the US Government the amount of money to initiate the program and then monitor/manage it. But.. we are talking about a Government that cannot manage a single entity without huge cost over runs and excessive waste.. so who knows...

[TheWitch]

Because car emissions are something you can compare to each other. A 4 door sedan that has X amount of emissions can equal another 4 door sedan's. Companies on the other hand, have far greater variances depending on how big they are, what they are producing, where they are producing it, etc... it's like comparing apples to hubcaps.

But....if there's so much variance that an industry standard is apples to hubcaps, then how will this "cap" be set? I thought that's how they would arrive at the cap in the first place, via a standard measurement, ie an electricity producing plant can emit 1 unit of junk for every kilowat hour of electricity they produce. If they go over that, they've capped and have to buy more credits. A steel producing plant can produce 2 units of junk for every ton of steel, a car manufacturer can produce all they want if the government owns them, but if they're Ford they can only produce 3 units per vehicle, and etc.

Or am I totally misundertanding.



In a perfect world, it would only cost the US Government the amount of money to initiate the program and then monitor/manage it. But.. we are talking about a Government that cannot manage a single entity without huge cost over runs and excessive waste.. so who knows...

:rofl:

I'll go with liberal incremental spending of money we don't have, then.

[Parkbandit]

But....if there's so much variance that an industry standard is apples to hubcaps, then how will this "cap" be set? I thought that's how they would arrive at the cap in the first place, via a standard measurement, ie an electricity producing plant can emit 1 unit of junk for every kilowat hour of electricity they produce. If they go over that, they've capped and have to buy more credits. A steel producing plant can produce 2 units of junk for every ton of steel, a car manufacturer can produce all they want if the government owns them, but if they're Ford they can only produce 3 units per vehicle, and etc.

Or am I totally misundertanding.



They will set their standard for each industry... but unlike vehicles, there's hundreds of different types of industries.