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Comprehensive Cap & Trade Primer

There's a Sucker Born Every Minute

When I think about cap & trade, I am reminded of an initiation prank that was played on new Soldiers in my unit during motor pool maintenance. A sergeant would tell a Soldier to get emissions samples from a vehicle and hand them a plastic shopping bag. The Soldier then went and put the bag on the exhaust pipe of a vehicle for a while until it was “good and full of exhaust” as instructed by the sergeant. Once they had an acceptable sample in the shopping bag, they would be ordered to report to someone like the battalion motor sergeant. The unsuspecting private then presented the plastic bag to the motor sergeant, at which point he said in disgust, “What the hell is this? Your platoon sergeant knows damn well I need at least 5 bags of exhaust samples. Get back out there and get some more!” With cap & trade, I envision federal employees from some new government agency or arm of the EPA, standing on the roof of a business with a plastic bag, supposedly catching their emission samples. Then they will deliver the bag to their boss who will peek inside and say, “Woah, that’s a lot of carbon! Go back and deliver this tax bill to that business.” The only problem is that the joke will be on the U.S. economy, not the government employees.

The Cap & Trade bill (also known as Waxman-Markey) recently passed the House and is on its way to the Senate. If it succeeds there, it will most certainly be signed into law by Obama as this is one of his top priorities. This bill will, at the very least, make life more expensive here in the U.S. If fully implemented the way it’s supposed to be, it will probably break our economy. I would like to use my own industry, metals, to demonstrate this.

U.S. Industry is Already on Life Support

I work for a metals distributor. We buy material from mills, stock them in our warehouse and resell them. As with many other American industries, our metals industry has taken a beating from imports from foreign countries like China. That wasn’t the case 20 years ago because China was making crap, but the quality of their products has improved a lot and people will gladly buy it now because it is so much cheaper. This is especially true for commodity items like stainless steel pipe and hot rolled carbon. If we get a quote from a Chinese mill and a quote from a Domestic or European mill, the Chinese mill will be lower about 9.5 times out of 10. There have been a few rare occurrences in this down economy where a domestic/Euro mill has had one particular item that they really needed to move and had a fire sale, beating the Chinese price. In general, though, the difference between buying Chinese & buying domestic is like the difference between shopping at Wal-Mart and shopping at Saks: you’re not going to brag about what you bought, but it will get the job done and it’s a whole lot cheaper.

Most of our customers who insist on buying non-Chinese material are usually reacting to trade tariffs or government-mandated requirements. For example, customers in Mexico have to pay steep taxes if they buy Chinese material, so they avoid it like the plague and will only purchase it if there is no other option. Here in the U.S. we have several confusing and somewhat protectionist laws but right now they apply more to DOD-related purchases than anything else. One example is the DFARS amendment that requires any metal sold for DOD use to have been melted and manufactured within a certain list of countries, almost exclusively in the U.S. or Europe. There is ostensibly some sort of national security reasoning behind this since when you’re talking DOD you’re talking military vehicles (jets, ships, etc) but it all adds up to cutting Asia out of the market because there isn’t even an option to buy Chinese. So that means that it costs the government more to buy these items, which makes expenses higher, which means more of our tax dollars are spent on this stuff.

You may be thinking, “Ah-ha! We simply need to cut out greedy middle men like your company to drive prices down!” An economic explanation of the benefits of middle men is outside the scope of this post, but I’ll give a very quick answer. The benefit my company provides is the same as when you go to Kroger to buy four or five packs of hot dogs for a cookout instead of going straight to Oscar Meyer and purchasing 1,000 Lbs of hot dogs at one time.

Anyway, U.S. mills already have a hard time competing with foreign mills due to price because if no end user wants to buy their metal then distributors won’t buy it, either, because they’ll have no one to sell it to. On the global top 10 steel producers list for 2008, the U.S. ranked a distant tenth. Arcelor-Mittal, the global conglomerate based in Europe, is a solid #1 while China, India, South Korea, and Japan divvy up 2 through 9. It is clear that the U.S. is no longer a major player in the steel producing industry. Price is the main reason behind this, and the enactment of a cap & trade system will drive the cost up more. The only way to prevent that from adding more hurt to an already hurting industry will be to force people into buying U.S. metal by passing new tariffs, “Buy American” acts, etc. See here for a brief reasoning of why those ideas ultimately don’t work.

It’s Not Hard to Figure Out

Why will cap & trade add more cost to metal? The mills will have higher operating costs since electricity will be more expensive, and they will also have to pay their own carbon taxes since producing metal produces those dreaded greenhouse gases. That means the mills will charge my company more for their material, and that means we will have to pass that additional cost on to our customers PLUS our own higher operating costs because our utility bills will also go up. Nobody will be making any more money from the sale, the customer will have to pay more, and since we only sell raw materials, our customers are making things out of what we sell them and they will have to pass along all of these additional costs to the final end user plus their own higher operating costs. The only businesses that will be making money hand over fist are the carbon credit traders, but more on that later.

So when you hear pundits talk about how cap & trade is not a big deal because it’s “probably” not going to raise your personal utility rates as much as the right wing fear-mongers say it is, they are completely ignoring all of the additional costs you will be paying in business mark ups because it will be more expensive for them to operate as described above. That is why China stands to make gobs and gobs of money. Businesses will still want to keep prices as low as possible and will want the cheapest materials possible, and the cost of Chinese material will not go up at the same rate as ours unless it is inflated artificially by tariffs or some other protectionist act. If we don’t enact measures like that, we will give foreign companies an even greater stranglehold on the market than they already have. If we do enact them, it will either spark a trade war as described above or at the very least inflate everybody’s cost by not allowing any cheaper alternatives. It would be like shutting down Wal-Mart and forcing everyone to shop at Saks, which not everybody can afford.

Even worse, there are some areas of the metals industry that the U.S. does well in, like aluminum tubing or aluminum aerospace sheet, where companies like ALCOA and Kaiser enjoy a good share of the market. One reason is because those products are lighter and not as cost effective to import across the Pacific since a lot of the metals business is driven by weight. Another reason is because China hasn’t quite caught up yet in the aluminum quality department, probably because it hasn’t been cost effective for them to do so. They have been breaking into the aluminum commodity market (bar, plate, etc) but customers that buy commodities aren’t as concerned with quality as, say, aerospace customers are since they are making things like hand rails instead of airplanes. If we increase the price of our material, though, there’s a very good chance we may give China the excuse it needs to turn their attention to breaking into one of the last few areas of the market we have managed to keep them out of. I don’t think that’s a good idea.

Now you can continue to theorize all you want to that the increase in costs from cap & trade won’t really be that much, but you still have to admit that there will be an increase, and even if it turns out to be small it is still an increase during a time when the economy is sucking wind, and that’s not going to help things. Also, whatever initial increases come will rise over time as the government mandated cap is lowered. Finally, to argue that the price increases will be insignificant is to argue against the entire logic of the cap & trade system in the first place since higher costs are supposed to drive businesses to invent all of these new technologies and renewable fuel sources. So if prices won’t increase significantly enough to make people notice, why do this at all? More on that later, too.

Very likely, once companies raise their prices the government will deflect the ensuing public discontent to the old scapegoat of corporate greed. Can’t you already hear all the news stories about people getting laid off, not able to pay their utilities, not able to go grocery shopping, but meanwhile all of these greedy corporate execs are still making lots of money? Think about it: when the cost of doing business goes up for companies, the only way to not pass on extra costs is to cut costs somewhere else. How can they do that? They can fire people, give people pay cuts and/or less working hours, do things like turn off heat & A/C during working hours, cut production to avoid having to pay for more emissions permits, cut corners in quality (like cereal companies holding their prices but packaging less product on the inside), or most likely: a combination of all these things. I don’t think any of those options sound good.

Our economy could potentially be turned on its head as businesses worry about producing too much and thus paying higher carbon penalties while at the same time employees will be making smaller wages and having to pay more for everything. One of the major problems with our economy right now is that we consume far more than we produce, but cap & trade will only add to this trade deficit as it provides steep penalties for production that will only get steeper as time goes along. Oh and depending on what you think the repercussions of Obama’s massive spending will be, the average person may also be looking at much higher regular taxes and/or hyper inflation due to our currency being worthless from printing too much money to cover debt.

The Only Silver Lining (But Not For Everyone)

The only remotely positive part of this bill is a supposed provision that promotes the construction of nuclear power plants. While nuclear power is greener and more efficient than anything else we have right now, I think we all know that environmentalists despise and fear it with a passion (just like they end up hating and despising any energy solution other than living in a mud hut and starving to death). According to the June 26 – July 2 newsletter from the Nuclear Energy Institute, the way the nuclear provision will work is, say a utilities company has an obligation to get 15% of their power from renewable sources but it currently gets 100% of its energy from non-renewable sources. If the utility builds a nuclear energy plant that cuts its emissions to 85%, then it will reduce its renewable obligation to 15% of 85%, or 12.75% in reality. I’m not vouching for the accuracy of those numbers, but I’m all about anything that will let us build more nuclear plants, so if it’s true I’m all for it.

Am I being hypocritical by saying I am in favor of legislation if it supports nuclear power but not other forms of energy? No, because nuclear power is something that exists right now that has already been proven to work. It has been suppressed by our own government due to the same eco fear mongering that is driving this global warming hysteria. We can already build nuclear plants now without the “help” of a cap & trade bill, the success of which hinges on the hopes of people suddenly creating technology even better than nuclear because the government said to. And I’m not buying any of these nuclear power promises, anyway, until the reactors are up and running in the proposed new plants. If environmentalists will block construction of solar panels because it’s supposed to hurt turtles, I don’t think they will allow widespread construction of nuke plants proceed without a challenge. More on that below. (UPDATE 1: Stories like this are what make me very skeptical that Obama will actually follow through on his nuclear promises. This is typical of how the left works. They will praise nuclear power and say they want to build more plants, but in the next breath they will find some problem with nuclear power and be against whatever solution is found for it. We can’t use Yucca Mountain because it’s unsafe. We can’t reprocess spent fuel like Europe does because…well because. Don’t hold your breath waiting for all of these nuclear plants to spring up.)

How Will Cap & Trade be Implemented?

In case you’re still hazy on the details, the idea is that the government sets a cap on the amount of carbon emissions/greenhouse gases/pollution/whatever-you-want-to-call-it that companies can put into the atmosphere. Businesses will receive a certain amount of permits that allow them to release a certain amount of these emissions. If a company doesn’t have enough carbon permits, then they need to buy (or “trade”) extra permits from other companies that don’t pollute as much and have extra permits left over.

Before I get to anything else, just stop and think what a mammoth task monitoring all of these businesses will be. I am skeptical that you can accurately measure the amount of greenhouse gases produced by any business, let alone every business, but we all will have to take it on faith that the government is smart and honest enough to do that. Again, the motor pool prank comes to mind. The cap is only supposed to apply to businesses that generate over 25,000 metric tons of CO2 equivalent, but how are we to know whether or not a business goes over that amount? I’d imagine that everyone will have to be monitored to ensure compliance. Now imagine the enormous bureaucracy that will be created to do nothing other than monitor carbon emissions. That’s a lot of government employees which means even more taxpayer expense heaped on top of all this. And like every other part of the living organism that is the government, this bureaucracy will only grow over time and never shrink.

In theory, though, any up-front pain is totally worth it as the result will be a nirvana of clean, renewable energy from alternative fuels. Companies will stampede towards new, green technology to avoid having to pay for extra permits and also to make money selling excess permits they no longer need to other companies who haven’t quite caught up yet. In reality, though, the likely alternative energy sources researched already are nowhere near as cheap, reliable or effective as the current ones. I know that because if these things were viable on the free market, every power company in the country would already be using them since there has not been any government restrictions placed against green energy as there has been against nuclear energy & fossil fuels. Anyone stubbornly sticking to something like coal would get run out of business by some other company offering cheap, plentiful green energy.

Since green technology has had significant flaws, the only way it can survive in the market right now is by government mandate. Part of the reason the free market works is because there is plenty of consumer choice, so to survive you have to constantly be offering something better than your competition at a competitive price, so consumers win and businesses have plenty of incentive to create new and better technology. With green energy, though, nobody is going to have a real choice. If you don’t like solar or wind power, then you can’t just switch back to coal. Eventually it will be too expensive for coal-based power plants to operate let alone the average person pay for that electric bill. As Obama himself said, people can build a coal plant if they want to, but it will bankrupt them. I suppose it is possible that someone will invent some miraculous new fuel with a limitless source that costs next to nothing (like the answer has been right in front of us all along and all that was needed was a few billion dollars in government grants because free market incentives weren’t enough to pursue it) but I don’t think we should scrap our entire way of life based on the assumption that will happen because the government says it should. And this point should be obvious, but if this system ends up breaking our economy then THERE WILL NO LONGER BE ANY MONEY TO FUND THIS RESEARCH.

Even if green energy worked as well or better than traditional sources, they are already being sabotaged by Democrats & environmentalists just like fossil fuels. Diane Feinstein from CA is trying to have prime solar & wind real estate protected against energy development (link again) because it will allegedly harm animals and not look nice (hmm, sound familiar?) and there is even a growing movement against windmills because they cause “Wind Turbine Syndrome”. I thought that was a joke at first, but there is even a website dedicated to warning people about this new terror: www.windturbinesyndrome.com. Maybe Don Quixote was onto something, after all? So we are going to pass all these laws mandating the use of green energy that requires a lot of specialized land (because you can’t build a solar or wind farm just anywhere) and then we’ll find out that we won’t be allowed to develop green energy anywhere. I guess that means we’ll keep importing our energy from somewhere else since our own government will be preventing us from developing our own sources…kinda like right now.

A Very Convenient Truth

Perhaps the most disturbing result from a cap & trade scheme is that it pours gasoline on the fire that is the carbon offset scam. Carbon offsets or credits are different from the government emissions permits because the offsets can be sold by anybody. I could tell you I will stop watching TV for the rest of my life if you pay me $20,000 up front and the emissions saved will allow you to drive your SUV for 3 years instead of bike to work. I could still be watching TV and you’d never know, but at least you would feel better about yourself. It’s amazing that we’re expected to believe the only thing truly needed to combat global warming is money, but that’s what carbon offsets come down to. Al Gore is not a hypocrite for flying his private jet out to accept an Oscar because he has enough money to buy carbon offsets for his travel, which completely erases all of his emissions. Average people, on the other hand, are supposed to feel guilty for taking a shower or heating their home. If global warming is real and carbon offsets are a legitimate way to fight it, why don’t all of these fabulously wealthy activist celebrities and politicians set the example for us by living in a shack and dumping all of their extra money into carbon offsets? Think of all the good that would do! That’s just a rhetorical question, I don’t expect an answer.

The way this game is rigged, it’s up to members of the proletariat to pony up the funds to save the Earth while the new elite class can continue to live however they want because they can afford it. Since Europe went down the cap & trade yellow brick road, a hungry new market for carbon offsets has been created that has been increasing every year. I don’t think this is an accident. According to the World Bank’s Carbon Finance Unit (yes, World Bank has a carbon finance unit, which should tell you something), offset trading started off at $11 billion in 2005 (the first year of Europe’s cap & trade), rose to $64 billion in 2007 and just hit $126 billion in 2008; and this is not a running total of expenses, but annual costs for different years. So think about that: $126 billion being spent on a government mandated expense that is passed along to consumers, and that’s just last year. We are talking annual Iraq war funding levels now. I’m sure you can imagine how many offset sellers are salivating as they imagine the U.S. private sector added to this racket.

So if cap & trade works, then why has carbon trading growth exploded off the charts? Shouldn’t it be going down or be at least somewhat stable? If cap & trade works, where is all of Europe’s amazing new, cheap, efficient, & reliable green technology? They’ve already had four years to work on this stuff and apparently have nothing to show for it. It seems that if cap & trade was effective, Europe would have been laughing at us last year during the energy crunch because they would have been largely immune to its effects. As it turns out, though, cap & trade gave them no advantages whatsoever and arguably even made things worse.

The price of carbon credits went up along with everything else energy related in 2008 , so that was yet another cost thrown onto the pile. Ironically, China & India are currently the world’s two largest carbon offset sellers according to World Bank, and guess who the largest offset buyer is? That would be the European private sector, which is virtually forced into buying the offsets by their own government. So anyone out there who was up in arms last year about all of the oil speculators that caused the $4/gal gas bubble, wait until you see the carbon credit bubble that appears after Waxman-Markey is passed. Speaking of bubbles, the carbon market crashed last year right along with oil, reducing the cost of offsets to almost nothing. That means it was cheaper for European companies to use fossil fuels than to use & develop green energy because even the government emissions permits were worthless, which is the exact opposite of what the legislation was intended to do. Shockingly, not long after the carbon offset market crashed, European utilities slashed their rates because they fired up their old fossil fuel plants again. Funny how that works.

Has Europe’s Cap & Trade System Worked or Not?

That depends on who you ask. Right now there is one camp that holds up the European system as a great example that we should model our own system after. They say it’s been proven to work because the European economy is not broken, and thus anyone that warns of that type of danger in the U.S. is just a liar or a shill for Big Oil. The interesting thing is what the other camp (mostly environmentalists, not politicians) says, which is the European system is a failure because it has not been tough enough. The cap was set too high, the government sold out to business interests, there was no limit set on buying offsets, too many carbon allowances were handed out, allegedly polluting companies were allowed to make windfall profits; in other words, it did not work because it did not hammer business enough. That makes sense to me, which is why I find myself on the same side of this bill as Greenpeace, though for completely different reasons. If this second camp is right, then the European economy has not truly been through the wringer of cap & trade, and the $164 billion worth of carbon offset trading last year is just the tip of the iceberg. Maybe that money won’t all be spent on offsets, but it’s still going to be passed on to consumers. That doesn’t make me anxious to rush ahead with the legislation.

What are the Defenses of Cap & Trade?

For an answer to that question, let’s see what NY Times resident Keynesian and Nobel prize-winner Paul Krugman says. According to him, anybody who says that cap & trade will hurt the economy is merely talking junk economics, just like global warming skeptics are all engaging in junk science. His reasoning? Emission permits will be auctioned off unlike in Europe, and the extra money made from the auctions will be rebated back to the consumers or used to reduce other taxes. I’m going to say that argument is weak, at best, since there’s no guarantee that any of those profits will ever find their way to the consumer. His next argument? The price increases simply won’t be that bad. Conservatives, capitalists and various other unsavory free market advocates are lying, don’t believe them. We’ve been over that; it’s a self-defeating argument if you’re trying to hawk a cap & trade system.

Third, says Krugman, cap & trade will actually HELP the economy by forcing businesses to invest in green technology due to the increasing cost of using fossil fuels and the market will take care of things from there. I like this answer, and not just because it is contradictory to the second argument (because businesses won’t change until they feel financial pain). I like it because Krugman the free market basher assures us that the free market will take care of inventing all this mythical new technology if only we get the government to ensure that the market isn’t free. In fact, he says that proponents of the free market are hypocrites if they denounce cap & trade. This is, of course, totally fraudulent logic since it misrepresents the whole idea behind the free market.

If the government could pass a law saying, “You will now invent really cool stuff or go out of business.” then the Soviet Union would have dominated the world. The free market doesn’t work by some central-planning authority saying something like, “Here is a cardboard box. You will now make an iPod out of it.” No, the free market works because a company like Apple figures out that people would love something that could hold their entire music library yet fit in the palm of their hand and they would pay a lot of money for it. Apple figures out how to do it on their own, but in the end they can only charge what people are willing to pay for it (as evidenced during the iPhone price cut). And they have to constantly improve their product otherwise one of their competitors will edge them out of the market by making a better product. Until that happens, though, Apple can charge as much for iPods as they can and they deserve every cent of profit. Belief that a cap & trade scenario can stimulate the same type of innovation is belief that in 1985 a law could have been passed outlawing casette tapes because we really needed iPods. Krugman’s argument makes the same amount of sense. Companies have already been trying to find alternative energy solutions because they know if they succeed they will make a killing. Despite that, there has still been little progress, but is the best answer to artificially create an environment where fossil fuels are off limits?

Krugman ends with the obligatory scare tactics as he reminds us that the real reason for why cap & trade needs to pass is that if it doesn’t we’re all going to die. He has to do include this reasoning so when all of his economic ideas turn out to be completely wrong, he can point to global warming and assure us that it all had to be done anyway…y’know, for the planet. As he puts it: “The important thing is that the planet is in danger, and the longer we wait the worse it gets. But it is an extra reason to move quickly.” Case closed!

A more in-depth defense is from Dr. Bill Chameides, the dean of the Duke school for the Environment. It is a multi-part spiel about why cap & trade is completely awesome. Dr. Chameides (henceforth referred to as “Dr. C”) deftly maneuvers his way through just about every cap & trade argument you can think of and has an answer for everything….only his answers leave much to be desired. I don’t even know where to start with this one as I could write a whole separate post on it, but I will make a few points. The most telling statement is regarding how the government decides what the cap limit should be in the first place: “[The climate scientists] tell us how much greenhouse gas emissions the atmosphere can take. Admittedly, it’s next to impossible to derive a definitive amount, but the scientists can give us something to work with.” In other words, Science will etch the cap amount on a tablet with Its sciency appendage, and the climatologists will descend from Mt. Sinai and declare, “Lo, we hath been given ‘something to work with’. Let us now completely destroy our way of life for it pleases Science and the Earth shall bless us.” I know that’s not exactly the same thing as Moses and the 10 commandments, but it might as well be according to the description given by Dr. C.

Dr. C also reaffirms Krugman’s praise of how the free markets can create all of this amazing new technology even as he’s explaining how cap & trade is required to create a market correction because the market can’t deliver on its own: “…the trade part is used to allow the market to seek out the most efficient, least costly ways of meeting the cap.” So the market sucks, but the market will work. His market correction discussion gets downright creepy as he explains why we need to do things like shove new building codes down people’s throats because nobody would be willing to pay the extra up-front costs on their own. In other words, people are too stupid to figure out the right thing to do, so the government needs to prod them in the right direction like the cattle they are. He also doesn’t mention that any estimated savings the buildings will give by being more energy efficient are purely theoretical and he also neglects to mention how people will be totally screwed when they try to remodel or sell their house. But who really cares about that anyway when the entire planet is at stake, right?

Another brilliant point is that even though cap & trade will make things more expensive, we don’t need to worry about that because if we don’t pay that cost now we will be pushing all of that cost on to our children and grandchildren in the form of “…health care expenditures, losses in environmental services like drinking water, and the costs of digging out from floods and recovering from droughts.” So when you’re shutting off your A/C in the middle of summer or turning your heat off in the middle of winter because you can’t afford your bills, take comfort knowing that if you weren’t sweating your you-know-what off or freezing to death your house would be flooding anyway. You say po-tay-to, I say po-tah-to. Funny how these defenses inevitably revert to eco fear-mongering to seal the deal. It’s almost as if the logic behind them isn’t all that sound, so they need to add the equivalent of “Because if you don’t do what I say you will go to hell.” to squelch any lingering doubts. By the way, if Dr. C is so worried about us passing on debts to future generations, I’d love to know what his position was on passing Obama’s stimulus plan a few months ago.

Some of Dr. C’s defenses are nothing but wishful thinking, such as the part where he addresses concerns about China not creating their own emissions cutting program. One of his ideas is from a NY Times columnist who says that we will actually be better off doing cap & trade before the Chinese because we will invent all of this amazing 21st Century technology before they do and then the Chinese will be forced to buy all of their stuff from us! Yeah, that’s stable enough to mortgage our future on. Even if that doesn’t work, though, no problem says Dr. C. We’ll just put up some carbon tariffs and that will bring China to its knees! I’ve heard this argument before, that even if we do spark a trade war the Chinese will acquiesce to us because their economy depends on us buying things from them. The problem with this argument is that it assumes China is completely dependent on us to drive their economy, which is false. Furthermore, China is working hard to make us less of a factor for their economic well-being, probably because they realize we’ll be bankrupt in another 15-20 years. They have already been making inroads with South America, Latin America, the Caribbean, and even Mexico whom they have traditionally been trade enemies with. It makes sense for both parties to forge a business relationship, doesn’t it? If you are an up and coming South or Latin American country, would you rather do business with a heavily in-debt America whose prices have just spiked off the charts or with a China who is granting you business loans and offering goods at rock-bottom prices? I think it’s going to be a tough sell when we tell our neighbors to buy more expensive material from us instead of the Chinese solely for the good of the planet.

Now Dr. C does mention that China is ambitiously going after renewable fuels and has “announced intentions” to cut back on greenhouse gases, but seriously; does anyone believe that for a second? If you do, two questions: who is going to monitor China’s greenhouse emissions and who is going to make them cut back if they decide they don’t want to? We may not even have the chance to worry about that because China is several cars ahead of us on the clue train as they have gotten themselves considered to be a “developing” nation. The logic behind this is “rich” countries (that is, Western countries) have already been making lots of money and polluting for years, so we should be the ones to do the whole cap & trade thing first as China needs a chance to catch up with us, but they swear that once they’ve made enough money they are totally going to start cutting their own greenhouse gas emissions, like for realz, they are super cereal. I think it’s more like China is in a no-lose situation. On the off chance that cap & trade turns out to work, then we’ll invent all that green tech and go through the pain for them. We won’t bleed them dry like Dr. C suggests because we will want to spread that green tech for the good of the planet, so we won’t come close to making back all the money we lost getting to that point. If cap & trade doesn’t work, then we wreck our economy and leave them standing as a new world superpower. China has already been pumping money out of Western nations with the whole carbon credit scam, but they’re just getting started. Europe recently shelled out at least $70 million for them to build a facility to test carbon capture & storage technology (CCS) with the thinking that they can develop the technology and start building more CCS plants, which will conveniently allow them to sell more carbon credits to Western nations.

One of the main topics at the upcoming climate conference in Copenhagen is going to be how much more the West needs to spend to help out all of these developing nations. So these other countries are not only poised to take over our industries, but we are going to pay them to build CCS plants and pretend like that is some sort of win for us. And don’t forget that in our case, any money we spend on something like that is money we don’t even have due to our swelling national debt. Complete madness, but China will be laughing all the way to the bank. This is where the talk about cap & trade being nothing more than a massive wealth redistribution scheme comes from, because all of the supposedly rich nations will be transferring large amounts of money to poorer nations. If you remember that China & India are the top two sellers of carbon offsets, then you can see how that process has already begun (though I’m really not sold on why we need to be charitable to China; if they are poor they did it to themselves through communism). So I pose the question again: who is going to make sure that China and India play ball and carry through with their carbon cutting promises? The U.N.? Hans Blix? Seriously, I have no idea, but I assume that Krugman and Dr. C will be volunteering to be in the first wave of the invasion of China that will be necessary if they refuse to submit to the will of the IPCC…y’know, for the planet. Or more likely, we will be so weak and indebted to China by then that we won’t be in any position to challenge them on anything, so it won’t matter one way or the other.

(UPDATE 2: Looks like the problem of China’s greenhouse emissions may be solved now. Commerce Secretary Gary Locke says that Americans should be paying for China’s emissions. The money quote: “It’s important that those who consume the products being made all around the world to the benefit of America — and it’s our own consumption activity that’s causing the emission of greenhouse gases, then quite frankly Americans need to pay for that.” I don’t even think I could make stuff like this up.)

My favorite part of his series, though, has to be Dr. C’s masterful execution of Orwellian doublethink as he explains how wonderful it will be to monitor the carbon emissions of every part of the U.S. economy but in the next breath explains why forests and farms will be largely exempt due to how impractical it would be monitor them as well as that it would create a political backlash amongst “foresters and farmers”. His rationale for this is, “Think about having to somehow document practices and emissions at each of these sources and then incorporate them into a market system of trading,” stressing the point that it’s just too large a task to be realistic, but only for forests and farms. Do I need to think about the difficulty in effective monitoring, Dr. C, or do you? I am already thinking about that, because it’s one of my main arguments against cap & trade in the first place. But I don’t know, I guess in his mind it makes sense to label two sectors of the economy as nigh impossible to monitor, but it’s not too complex to monitor a virtually infinite number of other parts of the economy. A little nutty, but then again not everyone agrees with his assessment anyway as there are already plans being formed to monitor individual carbon use.

I do have to give Dr. C credit for being honest, though. He says the only concern he really has regarding a cap & trade system is how well it caps emissions, which is why his first article is titled, “It’s about the cap, stupid!” Everything else is just pillow talk as he reminds us, like Krugman, that no matter what ends up becoming of our economy and standard of living, we don’t have a choice because the fate of the planet is at stake, and shame on you if you have any other concern because global warming is like Hitler.

In the end, the only winners from cap & trade will be the true believers in man-made global warming and hard core environmentalists. These are the people that believe the planet is on the brink of destruction, George Bush cost us eight years that have accelerated our demise and immediate action must be taken, consequences to our economy, standard of living, freedom, and our way of life be damned. They’re going to be happy because they see humanity as a blight upon the earth that does nothing but pollute and cause misery, and the United States is the worst nation in the world and our way of life should be destroyed anyway. Sure, the politicians will make a short term gain from all of those carbon taxes, but once the economy finally grinds to a halt it’s not going to be so much fun for them anymore. I have no doubt that this bill will pass the senate since there is no end to the number of politicians who are willing to prostitute themselves for a vote and the Democrats don’t need many more as there are already several Republicans supporting the measure. Actually, I overlooked some others that will win from our cap & trade. There will be other winners like China and India who right now have to be saying to each other, “Hey pinch me, will you? This is so easy I must be dreaming.” One can only imagine the sense of amazement they must have as they watch us voluntarily tighten the noose around our neck and kick the stool out from under our feet with a smug look of satisfaction on our face because we know we are doing it for a noble ideal and a moral imperative. You like that last part, don’t you? Paul Krugman’s not the only one who can finish with dramatic scare tactics.

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