Cap and Charade: The political and business self-interest behind carbon limits

The idea of a cap-and-trade system for limiting carbon-dioxide emissions in the U.S. has become all the rage. Earlier this year, 10 big American companies formed the Climate Action Partnership to lobby for government action on climate change. And this week the private-equity consortium that is bidding to take over Texas utility TXU announced that, as part of the buyout, it would join the forces lobbying for a cap on carbon emissions. But this is not, as Lenin once said, a case of capitalists selling the rope to hang themselves with. In most cases, it is good old-fashioned rent-seeking with a climate-change patina.

Start with the name. Most of those pushing this idea want you to think about it as cap-and-trade with emphasis on the trading part. Senator Barbara Boxer touts all the jobs that would be created for people trying to game the system--er, save the planet. And her colleague Jeff Bingaman calls cap-and-trade "market based," because, you know, people would trade stuff.

But for that to happen, the government would first have to put a cap on CO2 emissions, either for certain industries or even the economy as a whole. At the same time, it would allocate quotas for CO2 emissions, either based on current emissions, or on energy output, or some other standard. If a company then "over-complied," which means it produced less carbon dioxide than it was allowed to under the rules, it could sell the excess allowance to someone else. That someone else would buy the right to produce CO2 if doing so cost less than actually reducing emissions.

In this way, emissions would be reduced in an relatively efficient way: Those for whom reductions were cheap or easy would reduce, and if they reduced enough, they could sell their excess allowance to someone for whom the reductions were harder or more expensive. This kind of trading works, and we've argued in these columns that cap-and-trade beats the pants off just plain capping by lowering the overall economic burden of a cap.

The difficulties don't lie with the trading, but with the cap, which is where the companies lobbying for restrictions come in. James Rogers, CEO of Duke Energy, put it plainly earlier this year: "If you're not at the table when these negotiations are going on, you're going to be on the menu." Translation: If a cap is coming, better to design it in a way that you profit from it, instead of being killed by it.

Which is why the emphasis really should be cap-and-trade. It's all about the cap, because without it there's no trading. We don't buy our daily ration of oxygen because it's in abundant supply. Same with carbon dioxide--there's no constraint on your ability to produce CO2 until the government creates one. When it does, it creates an artificial scarcity. What Duke, Entergy, TXU, BP, Dupont and all the rest want is to make sure that when the right to produce CO2 becomes limited, they're the ones that end up owning the allowances. Because that would mean they could sell them, and make money off something that previously wasn't worth a dime.

Thus, Entergy, a utility that relies heavily on natural gas and nuclear power and thus produces relatively less CO2, would love a cap that distributes the allowances based on how much electricity you churn out, rather than on how much CO2 you produce. Entergy's "carbon footprint" is small compared to some other utilities, so an electrical-output-based cap would be windfall city. Dupont, meanwhile, wants credit for reductions already made because it sees instant profit in costs already paid. It also wants a cap to cover as many industries as possible so it can make money selling emissions-reduction products.

We don't begrudge anyone the opportunity to make a buck. But there's a difference between making money by producing things people want and making money by gaming the regulatory process. There's no market here unless the government creates one, and who has the profit opportunity depends entirely on who the government picks as the winners and the losers in designing this market in the first place. So it's no wonder that almost any business that has ever put an ounce of CO2 into the atmosphere is rushing to show its cap-and-trade bona fides.

By far the biggest question, however, is where the cap is set. The trading of emissions credits does nothing to lower the quantity of emissions--it merely shifts around the right to emit. It's the cap that sets the amount of CO2 put into the air. And as Europe has learned, that figure is a political football unto itself. When the EU started emissions trading in 2005, the price of a ton of CO2 quickly tripled before cratering when participants realized that the cap hadn't been set low enough to create a genuine shortage.

The European Commission is now in the process of reviewing each country's plans for allocating emissions allowances for 2008, but in the first round it found that all but one national plan had set the cap too high to comply with Kyoto's 2008-2012 limits. Of course, even a stringent cap means nothing if countries don't comply, and so far Europe's commitment to Kyoto has been more hot air than action.

The reason is hardly a secret, though you rarely see climate-change activists admitting it. Despite all the talk of "alternative" fuels, some 80% of the energy that the world produces today comes from carbon-based fuels. Barring cold fusion or some other miracle technology, that ratio won't change much for decades to come. That means, in turn, that any stringent CO2 cap would inevitably have serious economic costs. We doubt voters will elect politicians who tell them the cost of reducing their "carbon footprint" is more blackouts or a lower standard of living. And in any case China is putting up a new coal-fired plant every week, raising emissions that will overwhelm whatever reductions cap-and-trade would yield in the U.S.

The emerging alliance of business and environmental special interests may well prove powerful enough to give us cap-and-trade in CO2. It would make Hollywood elites feel virtuous, and it would make money for some very large corporations. But don't believe for a minute that this charade would do much about global warming.

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FRANCE WIMPS OUT OF BINDING TARGETS ON ENERGY USE

FRANCE dug its heels in yesterday against setting a binding target for renewable energy sources in the European Union, setting up a potential clash with its closest ally Germany at an EU summit next week. A French official said Paris continued to oppose making the goal of obtaining 20 percent of the EU's energy needs by 2020 from renewable sources such as solar and wind power mandatory as part of the 27-nation bloc's long-term energy strategy.

However, diplomats said Germany was insisting on a binding target to underpin the EU's drive for world leadership in the fight against climate change and had maintained that objective in a draft communique for the March 8-9 EU summit.

"We are not in favor of fixing binding targets in renewable energy," said the French official after EU ambassadors argued over the draft statement on Wednesday. "It is up to each member state, in all flexibility and subsidiarity, to set its own objective. Our position has not changed," he said. Subsidiarity is the principle that decisions should be taken at the lowest effective level of government.

Chancellor Angela Merkel, who will chair the summit under Germany's EU presidency, omitted any mention of a mandatory target for renewables in a speech to parliament in Berlin. She urged EU leaders to approve bold steps to combat climate change but said Germany was not prepared to shoulder the same heavy burden of emissions cuts as it has in the past. Merkel voiced support for European Commission proposals to cut greenhouse gas emissions in the 27-nation bloc by 20 percent by 2020 and 30 percent if other big industrial nations join in.

British Prime Minister Tony Blair's spokesman confirmed he had dropped resistance to a binding target after Merkel and European Commission President Jose Manuel Barroso convinced him it would give the EU's green leadership greater credibility.

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Britain: Red Ken's green tyranny

A 50-Year Plan of petty rules: the London mayor's climate change proposals show you can justify anything in the name of 'saving the planet'

The `climate change manifesto' is one of the few bold political statements on the public landscape today. London mayor Ken Livingstone has now added to the genre with his `climate change action plan', a grandiose piece of political pomposity that future generations will find it hard to beat.

The climate change manifesto goes something like this (delete where necessary): a politician/writer/environmentalist decides on a target for how much he/she thinks a particular city/country/continent needs to cut its carbon emissions. Then they consider various options, and put together their favoured portfolio for how this figure can be reached. Once published, their report is all but chiselled in tablets of holy rock. They have done the figures, and the figures add up: now we must all obey.

Livingstone's target is a 60 per cent reduction in emissions by 2025. Around half of this will be achieved by telling Londoners how to live, and around half by telling UK and European governments which laws to pass. There will be a `major marketing campaign' to inform Londoners of the changes they can make to cut their emissions, from turning off appliances to installing renewable energy sources in their homes. A pilot Green Homes `concierge service' will carry out energy audits of people's homes, and help them manage the transition to greener ways of living.

Livingstone sees no barriers to his effort to get Londoners to reduce their collective carbon footprint. He tells us which method of transport to use, steering us away from the private motor car and plane, by `promoting alternatives to the car' and `educating Londoners and advocating alternatives to air travel'.

He tells us which model of car to drive: `a gas-guzzling 4x4 vehicle' should be `no more sociably acceptable' than to `dump rubbish in the street', and so these drivers will pay 25 pounds congestion charge, while low pollution cars drive free. He even tells us how to drive: `The mayor will promote ecodriving (for example, smoother acceleration/braking and proper vehicle maintenance) by all car, freight, taxi and public transport drivers.' Pity the poor employees at the mayor's own Greater London Authority, who will get an extra programme `promoting staff energy-savings behaviour at home and at work by running ongoing staff campaigns'.

In order for Livingstone's target to be met, he also requires `a small number of key national regulatory and policy changes' from UK and EU governments. He elaborates: `Action will be necessary at a national and European level to save the further 13.4million tonnes needed each year to constrain London's total carbon dioxide emissions to 600 million tonnes between now and 2025.'

Government must apparently introduce a `comprehensive system of carbon pricing', and bring through `regulatory change to incentivise widespread rollout of decentralised energy [solar panels and wind turbines on houses]'. Meanwhile, EU and international authorities have responsibilities, including the `earliest possible inclusion of aviation in the EU emissions trading scheme (ETS) and levying duty on aviation fuel'.

In the name of tackling the climate emergency, it seems that anything can be justified. `London must...', we read; `it is imperative that we do find ways to meet these targets'; `action will be necessary'. The normal mechanisms of politics - proposals, debates, arguments - are apparently suspended. Once an individual can pose as the mouthpiece for the needs of the planet, there is no limit to their authority. Indeed, that individual's authority even stretches way into the future: Livingstone's plan goes 45 years hence. By 2050, he tells us, the majority of London's energy will be supplied by his favoured decentralised energy systems. By 2050? Livingstone is coming up for re-election in two years.

Now, it may be the case that London should bring through a change in its energy economy. The capital has done so simply and effectively before, with the 1956 Clean Air Act, which set up `smokeless' zones and persuaded Londoners and industry to shift from coal to smokeless forms of energy. Within 10 years, emissions fell by 74 per cent.

But any change in energy use should be the outcome of measured public debate about the different practical options - and one proviso should be minimal disruption to Londoners' lives and lifestyle choices. By contrast, Livingstone's plan for tackling climate change is a high-impact plan, with targeted fallout on everything from bus-drivers' acceleration to EU emissions legislation.

This is what happens when environmental management becomes a political and moral programme rather than a pragmatic response to a particular problem. The aim becomes to have a bigger and more far-reaching impact on people's lives, to design measures that we notice. After all, if Livingstone's action plan didn't affect us that much, it wouldn't be such a radical political statement, would it?

Livingstone's report reveals the true colours of the climate change manifesto. We see how the justification of environmental emergency gives a local mayor carte blanche to lord it over not just the capital, but Europe as a whole. Small wonder that one Livingstone aide described climate change as `the defining issue' that lay at the heart of his political programme. Perhaps we should use that election in two years' time to show Livingstone that political authority does have its limits after all.

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The separation of environment and state

Religion: a specific fundamental set of beliefs and practices generally agreed upon by a number of persons or sects.

Movement: a progressive development of ideas toward a particular conclusion.

Let us examine the key word in each of the above definitions. In religion it is beliefs; in movement it is ideas. If you look at these two words together, you see what both Christians and Environmentalists have in common.a set of OPINIONS that require faith and a conviction that what they believe is true. Yet, the Christian Religion and Environmental Movement are treated completely different by the United States Government, and the politicians who make the laws.

Let us start with the question plaguing the environmentalists.are not climate change and global warming caused by humans? Well, it depends on who you ask. Is there definitive PROOF? No. There are individuals who believe that humans cause global warming. There are those who believe that global warming is a cycle caused by solar activity. Both sides site evidence to support their case, but in reality, it comes down to each side's own belief system.

Now, we should be able to see the next question coming.Are not Christianity and Jesus Christ the One True Faith? Well, again, it depends on who you ask. Is there definitive PROOF? No. There are individuals who believe that Jesus Christ was exactly who he claimed to be, God on Earth. There are others who say he was just a prophet/man/phony, etc. Both sides have evidence to support their case, but in reality, it comes down to each side's own belief system.

One belief system comes from our former Vice President, Al Gore. He says that the `climate emergency' is about morality and not politics.

I completely agree! So, under the Constitution of the United States, and more specifically, the Supreme Court of the United States which has declared there to be a "separation of church and state," should there also be a "Separation of Environment and State?" Why is legislating the particulars of a religion ANY different than legislating climate change laws? The United States Government has expressly said that it will not advance the ideas of one particular religion over another (the 1st Amendment), yet the United States Government, as Al Gore and climate alarmists believe, is "morally obligated" to advance the opinions of climate change/global warming and create laws based on those opinions.

Why should climate change alarmists be given the bully pulpit of the United States Government when Christians are denied the exact same option everyday? Just as religious organizations recruit individuals and preach their message to them; maybe the environmental movement should structure their own ways to recruit individuals with their belief system. My guess is that those responsible for the climate change/global warming movement do not follow their own advice, i.e. conservation. It is a little tough to preach to someone about conservation when you arrive in a caravan of gas guzzling SUV's and limousines. (I wonder how Al Gore got to the Academy Awards anyway. Commercial aviation to a Hybrid to the red carpet.I think not).

Maybe, the climate change alarmists know the best way to `recruit' is to mandate. Take away choice and force individuals/corporations to accept their belief system, or else. I wonder what the reaction would be if Christian churches were to do the same through the United States Government? I think the word Bigotry comes to mind.

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AN EARLY ENVIRONMENTALIST, EMBRACING NEW 'HERESIES'

Stewart Brand has become a heretic to environmentalism, a movement he helped found, but he doesn't plan to be isolated for long. He expects that environmentalists will soon share his affection for nuclear power. They'll lose their fear of population growth and start appreciating sprawling megacities. They'll stop worrying about "frankenfoods" and embrace genetic engineering. He predicts that all this will happen in the next decade, which sounds rather improbable -- or at least it would if anyone else had made the prediction. But when it comes to anticipating the zeitgeist, never underestimate Stewart Brand.

He divides environmentalists into romantics and scientists, the two cultures he's been straddling and blending since the 1960s. He was with the Merry Pranksters and the Grateful Dead at their famous Trips Festival in San Francisco, directing a multimedia show called 'America Needs Indians.' That's somewhere in the neighborhood of romantic. But he created the shows drawing on the cybernetic theories of Norbert Wiener, the M.I.T. mathematician who applied principles of machines and electrical networks to social institutions.

Mr. Brand imagined replacing the old technocratic hierarchies with horizontal information networks -- a scientific vision that seemed quaintly abstract until the Internet came along. Mr. Brand, who is now 68 and lives on a tugboat in Sausalito, Calif., has stayed ahead of the curve for so long -- as a publisher, writer, techno-guru, enviro-philosopher, supreme networker -- that he's become a cottage industry in academia.

Last year, Fred Turner of Stanford published 'From Counterculture to Cyberculture: Stewart Brand, the Whole Earth Network, and the Rise of Digital Utopianism.' This fall Andy Kirk of the University of Nevada, Las Vegas, is putting out 'Counterculture Green: The Environmentalism of Stewart Brand and the Whole Earth Catalog.' By next year we should be due for a revisionist historian's discovery of a modern social movement that Mr. Brand did not orchestrate. In addition to publishing the Whole Earth Catalog, he organized the first Hackers Conference, in 1984, and helped found The WELL, the early electronic community that was a sort of prototype of the Web. In Professor Turner's history, he was the impresario who knew everyone and brought the counterculture and the cyberculture together, from the Homebrew Computer Club in the 1970s to Wired magazine in the 1990s.

He is now promoting environmental heresies, as he called them in Technology Review. He sees genetic engineering as a tool for environmental protection: crops designed to grow on less land with less pesticide; new microbes that protect ecosystems against invasive species, produce new fuels and maybe sequester carbon. He thinks the fears of genetically engineered bugs causing disaster are as overstated as the counterculture's fears of computers turning into Big Brother. 'Starting in the 1960s, hackers turned computers from organizational control machines into individual freedom machines,' he told Conservation magazine last year. 'Where are the green biotech hackers?'

He's also looking for green nuclear engineers, and says he feels guilty that he and his fellow environmentalists created so much fear of nuclear power. Alternative energy and conservation are fine steps to reduce carbon emissions, he says, but now nuclear power is a proven technology working on a scale to make a serious difference. 'There were legitimate reasons to worry about nuclear power, but now that we know about the threat of climate change, we have to put the risks in perspective,' he says. 'Sure, nuclear waste is a problem, but the great thing about it is you know where it is and you can guard it. The bad thing about coal waste is that you don't know where it is and you don't know what it's doing. The carbon dioxide is in everybody's atmosphere.'

Mr. Brand predicts that his heresies will become accepted in the next decade as the scientific minority in the environmental movement persuades the romantic majority. He still considers himself a member of both factions, just as in the days of the Merry Pranksters, but he's been shifting toward the minority.

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Many people would like to be kind to others so Leftists exploit that with their nonsense about equality. Most people want a clean, green environment so Greenies exploit that by inventing all sorts of far-fetched threats to the environment. But for both, the real motive is generally to promote themselves as wiser and better than everyone else, truth regardless.

Global warming has taken the place of Communism as an absurdity that "liberals" will defend to the death regardless of the evidence showing its folly. Evidence never has mattered to real Leftists

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