FRONT PAGE CONTRIBUTOR
Congress Invents New Funny Money
The Constitution authorizes the Congress to coin money and to regulate its value. Hypothetically, if Congress wanted to, it could create an alternative to traditional greenbacks. Such a currency could enable off-balance sheet financing and circumvent the President’s budgeting process. As such, it would be invaluable as a way to get recalcitrant politicians, states and industries to go along with Congress’s bidding, without running into all kinds of messy accounting issues, like the national debt, deficits and the Chinese National Treasury. Or, for that matter, the Executive Branch.
Could Congress pull it off?
They could call the new specie Monopoly Money, but that name’s already taken. They could call it “Greenbucks” and conjure up some supposed environmental benefit to sell the idea to the American people. Or they could be really creative and call them “Carbon Credits”.
[House Energy and Commerce Committee Chairman Henry] Waxman [D-Beverly Hills], who will begin Monday the process of making final modifications to the bill before a committee vote, cut deals with members and lobbyists for electricity producers, manufacturers and refineries to give them billions of dollars in free pollution permits over the next decade in order to help ease their transition into a “cap and trade” system.
Under the system, the government would put a limits on carbon dioxide and other “greenhouse gas” emissions, and companies that produced more than allowed would have to purchase pollution rights. Waxman’s free credits would allow excess emissions for favored companies without a cost.
The plan initially faced seemingly insurmountable opposition because it would cause energy bills to skyrocket as power companies passed along costs to consumers and already struggling manufacturers laid off workers.
In order to win support from Democrats, the bill has been written to allow the government to give away many permits, 35 percent of them to the power companies and 15 percent to manufacturing and steel plants. Just 2 percent of available permits would go to oil refineries. [emphasis added.]
Rather than stopping the rise of the oceans, President Barack Obama’s push for greenhouse gas regulations is turning into another all-you-can-eat porkfest. As Rep. Henry Waxman, D-Calif., prepares to introduce a climate bill in the House Energy and Commerce Committee he chairs, big businesses and their well-connected lobbyists are lining up with the hope of getting rich off these regulations.
An early winner looks to be the power companies, represented in Washington by the Edison Electric Institute. U.S. automakers, soon to be controlled in part by the labor unions who so generously fund the Democratic Party, are also among a handful of likely beneficiaries of this legislation.
If an emitter needs more [carbon] credits, he buys them on the open market from someone—another emitter or a dealer—who has excess credits. The question for lawmakers: How to allocate the credits originally. Environmentalists want Washington to auction them all. Affected industries want credits given away.
Currently, Waxman’s bill gives away about half the credits, with most free credits going to the power industry. Edison Electric, the trade group representing these companies, has endorsed this bill.
It’s unsurprising the power companies should get their way. Data compiled by the Center for Responsive Politics show that the electric utility industry’s political action committees contributed $12.3 million to candidates last election—more than the PACs of the oil and gas, commercial bank, investment, real estate, or telecom industries—and nearly as much as all defense PACs.
Early drafts of Waxman’s bill will also include GHG credit giveaways to some manufacturers that are “trade sensitive”—such as steelmakers and carmakers. These companies, of course, are also very well connected politically.
Then there’s the issue of how government should spend auction proceeds. General Electric, bailed out automakers promising green cars, and wind and solar investors are at the front of the queue to dig into this new trough of porkbarrel funds.
The price the government charges for GHG credits doesn’t determine the price at which the credits will sell on the open market. A free GHG credit is not worth zero just as a World Series ticket won in a sweepstakes is not worth zero. The price will be set by supply (how many total credits, auctioned or given away, are in circulation) and demand (the difficulty of reducing emissions and the fine for over-emitting).
So, when government gives credits to electric companies, it is simply giving money to those companies while making it more expensive for everyone else to do business. The utilities could sell the free credits unless Congress prohibits selling some credits, which would defeat half the purpose of cap-and-trade.
Waxman has also used the promise of free credits to logroll some reluctant committee Dems to support his bill.
H/T Cooler Heads Digest