Author Topic: Exposed on CSPAN - CAP AND TAX BILL CREATES CARBON DERIVATIVES!!  (Read 3777 times)

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Offline Dig

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The bill removes much of the polution control systems and replaces it with Carbon Derivatives system where carbn derivatives swaps will be the next $1,000 Trillion fake Banking Bubble used to create a new Boom then Bust system that will completely destroy any possible method of us getting our country back on track.

After that boom then bust, all fetuses will be owned part and parcel by the state and you will need to ask permission of a banker before you are allowed to fart.
All eyes are opened, or opening, to the rights of man. The general spread of the light of science has already laid open to every view the palpable truth, that the mass of mankind has not been born with saddles on their backs, nor a favored few booted and spurred, ready to ride them legitimately

Offline Dig

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Re: Exposed on CSPAN - CAP AND TAX BILL CREATES CARBON DERIVATIVES!!
« Reply #1 on: June 26, 2009, 08:47:54 am »
EVERYONE READ THIS AND SPREAD IT AROUND!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!


Could Cap and Trade Cause Another Market Meltdown?

The same Wall Street players that upended the economy are clamoring to open up a massive market to swap, chop, and bundle carbon derivatives.

Sound familiar?


http://www.motherjones.com/politics/2009/06/could-cap-and-trade-cause-another-market-meltdown

—By Rachel Morris Mon June 8, 2009 4:00 AM PST

You've heard of credit default swaps and subprime mortgages. Are carbon default swaps and subprime offsets next? If the Waxman-Markey climate bill is signed into law, it will generate, almost as an afterthought, a new market for carbon derivatives. That market will be vast, complicated, and dauntingly difficult to monitor. And if Washington doesn't get the rules right, it will be vulnerable to speculation and manipulation by the very same players who brought us the financial meltdown.

Cap and trade would create what Commodity Futures Trading commissioner Bart Chilton anticipates as a $2 trillion market, "the biggest of any [commodities] derivatives product in the next five years." That derivatives market will be based on two main instruments. First, there are the carbon allowance permits that form the nuts and bolts of any cap-and-trade scheme. Under cap and trade, the government would issue permits that allow companies to emit a certain amount of greenhouse gases. Companies that emit too much can buy allowances from companies that produce less than their limit. Then there are carbon offsets, which allow companies to emit greenhouse gases in excess of a federally mandated cap if they invest in a project that cuts emissions somewhere else—usually in developing countries. Polluters can pay Brazilian villagers to not cut down trees, for instance, or Filipino farmers to trap methane in pig manure.
 
In addition to trading the allowances and offsets themselves, participants in carbon markets can also deal in their derivatives—such as futures contracts to deliver a certain number of allowances at an agreed price and time. These instruments will be traded not only by polluters that need to buy credits to comply with environmental regulations, but also by financial services firms. In fact, a study (PDF) by Duke University's Nicholas Institute for Environmental Policy Solutions anticipates that if the United States passes a cap-and-trade law, the derivatives trade will probably exceed the market for the allowances themselves. "We are on the verge of creating a new trillion-dollar market in financial assets that will be securitized, derivatized, and speculated by Wall Street like the mortgage-backed securities market," says Robert Shapiro, a former undersecretary of commerce in the Clinton administration and a cofounder of the US Climate Task Force.

Banks like JPMorgan Chase, Morgan Stanley, and Goldman Sachs already have active carbon trading desks that deal in instruments connected to Europe's cap-and-trade system and voluntary markets here. But business will explode if a cap-and-trade system becomes law. So it's no surprise that the financial industry has taken an intense interest in the fine print of the Waxman-Markey bill. According to data compiled by the Center for Public Integrity, the financial services industry has 130 lobbyists working on climate issues, compared to almost none in 2003. They represent companies like Goldman Sachs, JPMorgan Chase, and AIG (before it was shamed into temporarily halting its lobbying activities last fall). The industry "wants lawmakers to create a brand-new revenue stream for its bottom line, and cap and trade would do it," says Tyson Slocum of Public Citizen, who is a member of a Commodity Futures Trading Commission (CFTC) advisory committee considering how carbon trading should be regulated.

Among environmental groups, there is, understandably, less focus on the finer points of financial regulation. "The derivatives side is not something that a person who comes to the table worried about carbon emissions has on their agenda," says Michael Greenberger, a derivatives expert at the University of Maryland who has also served in the CFTC and the Justice Department. "Those people—and they're fighting a good battle—opened the door."

Already, the industry has achieved its main objective: The Waxman-Markey bill would create a big, convoluted market for carbon derivatives. Experts from the Congressional Budget Office have said that the most stable and effective form of cap and trade would involve a system in which the government periodically sets prices in much the same way that the Fed determines interest rates. That would prevent volatility, which would in turn remove the temptation to gamble on big price swings. In other words, it would provide far less opportunity for wheeling and dealing—and profits. Rep. Jim McDermott (D-Wash.) offered a proposal for a managed-price cap-and-trade scheme, but failed to gain any traction. Meanwhile, industry groups like the International Swaps and Derivatives Association pushed for a system in which a "broad suite" of financial products can be traded, and that's what Waxman-Markey delivers.

In an especially audacious move, the industry also argued that cap and trade should allow the very same types of unregulated instruments that helped spread risk throughout the financial system like a cancer, contributing to the economic meltdown. In particular, it lobbied for "over the counter" carbon derivatives—deals conducted directly between two parties with no one monitoring the risk. (Perhaps the most notorious form of OTC derivative is the credit default swap, which crippled AIG when it issued too many high-risk swaps while lacking the money to cover them.)

On this front, however, Wall Street was less successful. The day before the bill passed out of committee, Rep. Bart Stupak (D-Mich.) inserted language requiring all allowance derivatives to be either traded on an exchange or cleared by an organization registered with the CFTC. This would provide a paper trail for regulators, although the reporting requirements for clearinghouses are less stringent than those for public exchanges. Stupak also added limits to prevent speculators from cornering too much of the market. Still, the bill leaves many vital specifics to the White House, directing the president to form a task force to determine precisely how to avoid "fraud, market manipulation and excess speculation." Andy Stevenson, finance adviser at the National Resources Defense Council, says, "I would feel comfortable if much more of it were explicit." He applauds the bill's "spirit" but cautions that "the details are important."

The lobbying battle is not over. Chilton, the CFTC commissioner, praised Stupak's 11th-hour amendment, but expressed concern that it could be removed in the legislative process ahead. The bill, after all, has yet to pass through several more House committees—before the Senate weighs in. That gives the financial sector a few more bites at the apple. At the same time, Wall Street is marshaling its forces against Treasury Secretary Timothy Geithner's proposal to move most derivatives trading onto public exchanges, which would also cover carbon derivatives. "There are so many issues, so many jurisdictional obstacles out there, I'm just worried it's not going to get done," Chilton says. "I don't want people's good intentions to be all we get. I'm worried that people will start clustering and positioning, and the reforms these markets require aren't going to be enacted."

Even a well-designed regulatory system may not be able to prevent gamblers from contorting prices and discouraging the investments in green energy that are the entire purpose of cap and trade. After all, one lesson to be drawn from the economic crisis is that complexity is like catnip to the unscrupulous, and the carbon regime that would be created by cap and trade is nothing if not complex.

Perhaps the biggest uncertainty hinges on how offset derivatives—such as a contract to buy offset credits at a future date for a determined price—will be monitored. This too would be left to the White House task force to figure out. It will be a tough task because the quality of offset projects is notoriously difficult to verify. Sen. Jeff Bingaman (D-N.M.) has described them as "fraught with opportunity for game playing, which will be fully exploited, I'm sure."

In 2008, the Government Accountability Office examined the use of offsets in Europe's Emissions Trading Scheme, which theoretically has a rigorous process to certify that offsets are "additional"—that is, that they cause emissions cuts that wouldn't have occurred if the project hadn't been implemented. But even though projects must be reviewed by both national officials and an external independent monitor to qualify, the GAO found that it was "nearly impossible" to ensure that offsets really were additional. It concluded that offsets present "a significant regulatory challenge" and should probably be viewed as a temporary measure at best. "In practice [offsets] have proved impossibly difficult to successfully implement without fraud," writes Michael Wara, a carbon trading lawyer and coauthor of a Stanford University study that found that one- to two-thirds of offsets authorized by the Kyoto Protocol's Clean Development Mechanism didn't represent true emissions cuts. "Even in the presence of a tough regulatory system…that is working hard to get things right…lots of counterfeit carbon currency is making it into the system."

Michelle Chan, the investment program manager for Friends of the Earth, believes that if offset derivatives aren't properly regulated, they could become "subprime carbon"—futures contracts that promise emissions reductions but fail to deliver and then collapse in value. Already, she points out, some banks are bundling credits from multiple offset projects and splitting them into tranches to sell to investors. This kind of activity is "hauntingly close" to mortgage-backed securities, Chan told the House ways and means committee in March, arguing that it has the potential to spread risk throughout the financial system. At a CFTC hearing earlier this year, Skip Hovarth, president of the Natural Gas Supply Association, questioned whether the agency had the tools and the manpower to keep track of such an incredibly complex market, adding, "If this market fails, and all the derivatives and all the markets that attach to it that grow over time fail, it will make this last recession look like nothing.

Again, Europe's experience offers a glimpse of the difficulties of tethering an environmental goal to the whims of the financial system. In the early years of Europe's cap-and-trade system, speculators flocked to trade carbon. Prices seesawed wildly, and analysts warned of a "carbon bubble." Regulators made adjustments to stabilize the market—but then the financial crisis hit and carbon prices crashed. This January, an executive from the French energy giant EDF warned that carbon trading was in danger of becoming "a new type of subprime tool which will be diverted from what is its initial purpose: to encourage real investment in real low-carbon technology."

During the negotiations over cap and trade, little airtime has been given to the idea that perhaps carbon is fundamentally different from other purely commercial markets that weren't conjured into existence to save the planet. After all, the allowances are an artificial commodity—according to the logic of cap and trade, the government will issue fewer permits each year to encourage polluters to cut their emissions. "The supply is dwindling and will tail off—arguably it's much less clear that you need a derivatives market," says Greenberger, the derivatives expert. "You could try to control speculation, which is what Stupak wants to do—but even in a regulated market there are speculators, many of them. Or you could say, 'This is unlike any other market, and no regulation is perfect. So why take even the risk of speculation or malpractice that could distort the price—let's just not have derivatives.' I think it's a subject worthy of serious debate." Thanks to the persistent lobbying of the financial sector, however, that doesn't seem to be a debate that will happen anytime soon.
All eyes are opened, or opening, to the rights of man. The general spread of the light of science has already laid open to every view the palpable truth, that the mass of mankind has not been born with saddles on their backs, nor a favored few booted and spurred, ready to ride them legitimately

Offline codemonkey70

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Re: Exposed on CSPAN - CAP AND TAX BILL CREATES CARBON DERIVATIVES!!
« Reply #2 on: June 26, 2009, 08:50:10 am »
Good lord..
I cant really see how to stop all of this nonsense other than electing someone without this weird agenda and repealing all of this garbage. As if that would happen...  :-[ we're screwed.
A coward is much more exposed to quarrels than a man of spirit.
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Re: Exposed on CSPAN - CAP AND TAX BILL CREATES CARBON DERIVATIVES!!
« Reply #3 on: June 26, 2009, 08:53:20 am »
Rep. Bachmann appears on the Glenn Beck show to talk about the looming economic fallout if cap-and-trade becomes law, as well and the 2010 census and American Community Survey

http://www.youtube.com/watch?v=gvNlTe-KZPw

Just looking around youtube..

Offline Geolibertarian

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Re: Exposed on CSPAN - CAP AND TAX BILL CREATES CARBON DERIVATIVES!!
« Reply #4 on: June 26, 2009, 08:56:32 am »
The bill removes much of the polution control systems and replaces it with Carbon Derivatives system where carbn derivatives swaps will be the next $1,000 Trillion fake Banking Bubble used to create a new Boom then Bust system that will completely destroy any possible method of us getting our country back on track.

After that boom then bust, all fetuses will be owned part and parcel by the state and you will need to ask permission of a banker before you will be allowed to fart.

And as Alex has pointed out repeatedly this past week, the reason the psychopathic control-freaks who are behind all of this seem to be "going for broke" at this point is that they've concluded that they've been so successful in chemically, electronically, and intellectually lobotomizing the masses, that there's practically nothing the masses won't sheepishly put up with as long as they still have access to their beloved bread and circuses.









http://www.youtube.com/watch?v=YGTzClbwkc8
http://www.youtube.com/watch?v=VBKf-r9JEIU
http://www.youtube.com/watch?v=s1kgSlLawyQ
http://willthomasonline.net/willthomasonline/Attack_Of_The_Cell_Phone_Zombie.html
http://forum.prisonplanet.com/index.php?topic=100498.msg597289#msg597289
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http://schalkenbach.org
http://www.monetary.org
http://forum.prisonplanet.com/index.php?topic=203330.0

Offline Dig

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Re: Exposed on CSPAN - CAP AND TAX BILL CREATES CARBON DERIVATIVES!!
« Reply #5 on: June 26, 2009, 09:00:02 am »
Holy crapola!!!!!!!!!!!!!


Real environmentalists have exposed that CAP AND TAX is complete bullshit!!!!!!!!!!!!!!!!!

Please comment on this blog and let Jesse know that we appreciate his work on this.  He wrote this in April! It uses sourced material from two non-Rotschild controlled environmental organizations.  Also track those organizations (we need to start distinguishing true environmentalists from the Rothschild owned "World Wildlife Federation" and other decepticons).  The organizations are Rainforest Action Network and International Rivers and are documented in this blog. Happy reading!

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Is Waxman-Markey's "Cap" and Trade System Full of Hot Air?
Cries of alarm from the environmental left warn that offset provisions in cap-and-trade legislation "blow to pieces" the supposedly hard caps on global warming pollution at the heart of the proposal.

http://thebreakthrough.org/blog/2009/04/is_waxmanmarkeys_cap_and_trade.shtml
Posted by Jesse Jenkins on April 16, 2009 at 9:53 PM

Is the cap and trade system at the core of the draft Waxman-Markey climate and clean energy bill full of hot air? That's what a new report from two environmental organizations warns.

Rainforest Action Network and International Rivers released an initial analysis (pdf) of the Waxman-Markey climate and energy discussion draft yesterday. The two environmental groups conclude that the cap and trade regulations established by the bill would be "blown to pieces" by the up to two billion metric tons of carbon offsets the bill allows polluters to use in lieu of pollution permits.

Despite all of the talk of establishing hard caps on global warming pollution, the use of so many offsets would stuff the cap full of hot air, making it not much of a cap at all. The report concludes:
Unfortunately the "firm" caps exist only on paper. In reality, the caps will be blown to pieces by allowing polluters to meet their emission reduction responsibilities through buying offset credits rather than reducing their emissions.

If the full amount of offsets allowed by the Waxman-Markey draft legislation were utilized by polluters, the report concludes that any actual emissions reductions in capped sectors of the U.S. economy would be delayed until 2026, allowing a full seventeen years of continued business as usual. (See figure below...)


"We tried to be even-handed, but somebody has got to point out there are huge holes in the bill," Rainforest Action's Mike Brune told SolveClimate. "And it will delay investments in the clean energy economy that the Obama administration wants."

The new report marks an honest and stark criticism from the environmental left of the offset provisions included in the Waxman-Markey bill. These provisions were included with the express approval of the mainstream green groups Environmental Defense Fund (EDF) and the Natural Resources Defense Council (NRDC) and the big business and industry interests they've joined with to form the United States Climate Action Partnership.

RAN and International Rivers are not alone in criticizing the cap-and-trade provisions of the Waxman-Markey bill. Their cry of alarm on offsets comes on the heels of a Friends of the Earth report warning that without new financial regulations yet to be established or tested, cap and trade systems would be rife with the same kind of financial shenanigans that brought on the current financial crisis.

The report, titled "Sub-prime Carbon," warns that cap and trade systems could create a carbon derivatives market even larger than the credit derivatives market before the financial collapse. Friends of the Earth concludes that the use of offsets in particular would create a market for "sub-prime" carbon derivatives just as risky as the sub-prime mortgage-backed securities at the heart of the financial meltdown.

Friends of the Earth says they have "concerns about "subprime carbon," risky carbon credits based on uncompleted offset projects (projects designed to sequester or reduce greenhouse gases)." They write:
Subprime carbon credits may ultimately fail to reduce greenhouse gases and, like subprime mortgages, could collapse in value, yet they are already being securitized and resold in secondary markets. The report recommends that lawmakers include carbon trading in current debates about financial reform, and warns against hastily creating carbon markets without proper oversight.

At the heart of concern over carbon offsets is the scale of offsets allowed by the Waxman-Markey bill. Two billion metric tons is enough to allow polluters to swap offsets for roughly 30% of all pollution allowances required to be held under the proposed cap and trade system. Those are "stunningly high levels of offsets" according to the RAN/International Rivers report, and would increase the global demand for carbon offsets by a factor of eight or more from today's levels.

Yet even at today's levels, global carbon offset markets supported by the Kyoto Protocol and cap and trade systems in place in Europe (as well as smaller markets for voluntary purchases of offsets by businesses and individuals) are under fire for including "hot air," offsets of dubious quality and questionable environmental benefit. As International Rivers explains:
The problem is that it is not possible to ensure the additionality of these credits - i.e. "that every credit represents real, measureable, and long-term reductions in emissions," as concluded by the Government Accountability Office in a November 2008 report [see previous BTI post]. Our analysis of the Clean Development Mechanism (CDM), the world's largest carbon offset scheme, suggests that upwards of 75% of projects that received offsets were not additional.

That conclusion is supported by a 2008 Stanford University study of the Clean Development Mechanism which also found that:
"between a third and two thirds" of emission offsets under the Clean Development Mechanism (CDM) -- set up under the Kyoto treaty to encourage emissions reductions in developing nations -- do not represent actual emission cuts.

This has led Climate Progress blogger Joe Romm to dub carbon offsets "rip-offsets" because of their questionable character (for once, we can agree with Romm on something!).

Defenders of offsets and the CDM say we shouldn't throw the baby out with the bathwater though, and that with stronger regulation and oversight, offsets can deliver credible and verifiable emissions benefits. Fair enough, but as even this defender of the CDM had to admit when I asked her at Grist:
You are right, I do not expect that the supply of offsets can be anywhere near the 2 billion annual mark that the legislation is foreseeing. Look at the CDM, after four years of real operation the potential delivery is only at 1.5 billion through 2012 and so far it has delivered "only" 277 million CERs ["certified emissions reductions" - aka offsets].

The heart of the problem is therefore this: there just isn't any way to supply anywhere close to 2 billion metric tons of offsets per year while ensuring that the large majority are anything but hot air. Real, verifiable offsets are possible to ensure, but they simply require significant oversight, regulation and monitoring, which adds to their cost and restricts their supply significantly.

That all means that if you want to allow a significant enough quantity of offsets in a cap and trade bill to serve as effective cost containment -- the main reason the bill relies so heavily on offsets -- you will by necessity be expanding the offset market to a scale far beyond which it can be credible by any stretch of the imagination.

Now, environmental groups like RAN, Friends of the Earth and International Rivers are hoping the offset provisions in the bill will be stripped and a true "hard" cap on emissions will be established. Unfortunately, that expectation is far from realistic. Cost containment is inevitable when it comes to carbon pricing policies. Policymakers in Washington -- or anywhere else that's tried to implement carbon pricing, for that matter -- simply aren't willing to let carbon prices rise unconstrained to whatever level is necessary to drive compliance with a truly hard cap on carbon. They know that would be political suicide with a public far more concerned about gas prices and the economy than global warming. EDF and NRDC know that, and it's why they recommended including so many carbon offsets in their USCAP blueprint, which serves as the inspiration for the offset provisions in Waxman-Markey.

So the issue isn't cost containment vs. no cost containment. The real question we need to be asking is this: what kind of cost containment do you want?

As I told Josh Nelson, a blogger at HuffingtonPost, when asked me about the offsets in the Waxman-Markey discussion draft:

"Allowing that many offsets pokes a giant hole in the carbon cap, stuffs it with plenty of hot air, guts the carbon price signal for sectors we actually need to transform and - most importantly - robs us of billions of dollars of auction revenue that can and should be reinvested to accelerate and smooth the transition to a clean energy economy."

And of course, along with a heavy reliance on offsets, the Waxman-Markey bill also includes complicated provisions that allow borrowing emissions permits forward from the future, another way to kick the can down the road and delay the need to truly accelerate capped sectors on their path to a new energy economy. Industry interests are also calling for (and some are already getting) guarantees of free permits to pollute as well, pretty much ensuring that the price signal truly felt by these sectors will be limited for some time into the future.

So the question I keep coming back to is this: why would these convoluted and complicated cost containment provisions be preferable to a simple and transparent upper bound on the price of carbon under a "cap" and trade proposal, or alternatively, a transparent and modest carbon tax? (I'm largely agnostic about those two options as long as allowances are auctioned under a cap and trade proposal).

Transparently setting an upper price on carbon would allow businesses to truly plan ahead for future carbon prices, rather than create the inherent uncertainty and risk involved in the kind of carbon trading markets Friends of the Earth warns about. And by setting a modest upper cost up front, climate advocates can silence once and for all - and with absolute certainty - the worst case, nightmare scenarios drummed up by status-quo forces opposing the transition to a clean energy future. Finally, by coming to terms with the reality of cost containment and the limits of carbon pricing, climate advocates themselves can design effective policies to overcome these limitations and truly drive the transition to a clean energy economy.

For now, leading climate advocates continue to push forward under the illusion that climate legislation will set a "hard cap" on carbon, despite all the evidence to the contrary. Time is short to come to grips with the reality that there's just no such thing as a "hard cap" on carbon coming down the pike and to design complementary and alternative policies to pick up where the limits of carbon pricing leave off.



9 COMMENTS: [NOTE: These guys are logical thinkers, a true group of real environmentalists...reach out and touch a fellow patriot, it won't hurt. Let them know that we appreciate their work on this subject.]

Jesse, its refreshing to see someone in the environmental community not go gaga over the Waxman bill just because it has a Renewable Electricity Standard (which doesn't increase the carbon reduction under a cap/trade anyway, it just makes you pay more for the same amount). I would be careful citing the Friends of the Earth report on carbon trading though. One of their recommendations is to ban banking of allowances for use in future years, which I had never heard anyone seriously suggest before. I doubt you could find an economist who wouldn't agree that would seriously increase price volatility, not decrease it. There were a few other very curious proposals in there as well. On offsets, I don't think the right criticism is that "there's no way we can get 2 billion good ones." If, like the CDM, only X million are certified, that would still be a net plus if we could monitor/verify them. But we can't. Like the Stanford authors you mention wrote, (full study available at: http://www.ucei.berkeley.edu/PDF/seminar20090213.pdf ) there are just fundamental incentive and monitoring problems with any offset program. Finally, a couple more gimmicks that Waxman-Markey engages in. 1) The cap actually doesn't decline for the first 8 years. I'm confused where the idea that it does comes from (though the EPA administrator is given some authority to tweak things down the line. But you never know who will be president in 2012, much less 2020. In 2004 political consensus was Democrats wouldn't win another election for a longgg time). Check out pages 360-361 in the bill text here: http://energycommerce.house.gov/Press_111/20090331/acesa_discussiondraft.pdf 4,770 million allowances in 2012, 4873 in 2020. In the intervening years it doesn't even stay stable or anything - it bounces around between 4666 and 5391. Weird. I mean the path's a bit irrelevant because of banking, but point is way more emissions allowances (and so actual emissions) are authorized for as long as anyone's planning on still being in office. 2) The "strategic reserve" of allowances to buffer price spikes is really just an absolute price ceiling. This is because its a virtually limitless pool of allowances because it dips from every year in advance, and proportionately more from later years, when proportionately more reductions are supposed to take place already. And then its continually refilled by purchasing offsets after allowances are expended. An actual "strategic reserve" would be a great idea, but to do it responsibly you'd have to fill it with extra allowances from a price-floor in the early years, or at least borrow from years in the soon-future (within 5 years or so). Borrowing from decades in the future is just punting to the future, just like not passing anything would be. Posted by: Max Epstein at April 17, 2009 10:34 AM

huh, sorry for the huge clump, I swear I typed it in with paragraph breaks... Posted by: Max Epstein at April 17, 2009 10:36 AM
I agree that cap and trade is fundamentally flawed and I hope beyond hope that Congress can move beyond it and work toward a revenue-neutral carbon tax. The bottom line for me is that a carbon tax isn’t subject to the extreme price volatility generated by an inflexible carbon cap. Consequently, its stable price would encourage new investors to put capital in new energy R&D and would incentivize U.S. businesses to invest in more efficient energy sources. It's a win-win. Posted by: CTF at April 17, 2009 5:41 PM

Max, thanks for the comment. Yes, I'm not "gaga" over the Waxman bill, that's for sure. There are still a lot of crucial details to be worked out, and what we have now is a discussion draft only, but I'm not at all excited by it. You can read more of my coverage of the bill here: http://thebreakthrough.org/blog/2009/04/new_climate_bill_proof_of_misp.shtml The bill's authors try to make a big deal out of the fact that this is an "energy and climate bill", not a cap and trade bill, relying on the slough of additional regulations and standards in the bill, like the RPS you mention. But indeed, those regulations do little really to add to the bill's robustness, or even to help spur the development and deployment of clean, cheap energy technologies. For that, the bill should focus on reinvesting the proceeds of the carbon allowance auctions into clean energy development and deployment, enabling infrastructure (like a 21st century grid) and low-cost financing options to break down capital cost barriers for energy efficiency (in that order of priority, IMO). That would truly accelerate the transition to a clean energy economy in the U.S., create jobs, strengthen our economic competitiveness, lower the ultimate cost of compliance with the carbon regulations and actually make up for the limited price signal the cap and trade system is likely to produce (given all the offsets or other cost containment provisions). Watch the House Energy Subcommittee markup of this bill closely over the next couple of weeks. If Chairman Markey goes back to the kind of bill he introduced in 2008 (iCAP), which invested billions in clean energy, we may have something worth fighting for. If not, it'll be time to start from scratch while we wait for cap and trade to run aground somewhere down the line. (Note: our comments at the blog accept limited formatting and no html. We had a problem with it earlier and have turned it off. Sorry for the less-than-ideal comment formatting. We're trying to upgrade our comments fields soon. Bear with us!). Posted by: Jesse Jenkins at April 17, 2009 6:21 PM

p.s. Max: thanks for the tip about the total allowances allocated in those years. I'll dig into the bill and see what you're talking about. Sounds weird, and haven't heard anyone else talk about that yet. What do you think about my concluding point though: that cost containment is inevitable, so we'd better be (a) thinking about the best kind of cost containment and (b) designing the rest of the policy to make up for the limits on carbon pricing that cost containment entails? Posted by: Jesse Jenkins at April 17, 2009 6:27 PM

Hi CTF, thanks for the comment. In theory, I do tend to lean towards a carbon tax as a more transparent and straightforward way to set a carbon price, but like I said, a similar end goal can be accomplished through a cap and trade system with a price ceiling (or even a price floor as well), which makes it more like a carbon tax anyway. However, I'm not a fan of "revenue-neutral" carbon pricing, if by that you mean returning all of the carbon dollars to individuals or businesses through decreased taxes elsewhere or direct rebates. I think that defeats the primary purpose of the carbon tax, which is to raise significant revenues to reinvest in accelerating the transition to a clean energy economy. Given the political limits placed on carbon pricing, we are highly unlikely (I'd even say we flat out are not going) to establish a price signal on carbon that is sufficient enough to drive the transition to a clean energy economy at the pace and scale we need. Beyond that, there are many non-price-related barriers to a clean energy economy that the private sector cannot overcome, even with a better price signal on carbon. For that, we need a smart policy of targeted public investments in clean energy R&D, accelerated early stage commercialization and deployment, enabling infrastructure, education and low-cost financing to bring down capital barriers to efficiency. Almost all of those are "public goods" - i.e. their benefits are diffuse whereas the costs to any private sector actor would be concentrated and prohibitive. This is a role for public investment. Public investments built the railroads, highways, and fiber optic cables that united a transcontinental nation and enabled ever more efficient commerce. Public investments electrified rural America and irrigated the arid West. And it was public investment in technological innovation that gave birth to jet engines and commercial aviation, gas turbines and nuclear power, microchips and the Internet. Each of these smart public investments supported and catalyzed innovative American firms and businesses, spurred lasting economic growth, and served as the foundation of the nation’s economic competitiveness. It's time to do so again, and drive America forward into a clean and prosperous new energy economy. Posted by: Jesse Jenkins at April 17, 2009 6:35 PM
Jesse, sorry for the late reply. On your last point, I would phrase it a bit differently. Compromise is inevitable, but I'm not sure that has to mean "cost containment," as in the kind of cost containment that is so aggressive it undermines the cap. Remember how before everyone talked about how a cap/trade would disproportionately hurt the poor? But that argument, while not gone, is generally muted now that policy makers have gotten serious about returning most of the revenue back to consumers to alleviate price increases. Its hard to scare someone with "your electricity bill will go up 10%" if the other side can say "yea but we'll mail you a check for $800 every year, more than the difference." You could do this to address the regional cost issue as well, distributing some of the carbon revenue to states based on their vulnerability to a carbon price. Then, just like with the poor, there's no argument of "well what if the carbon price rises to X," because then the assistance goes up as well. So I'm still holding out hope that our need for compromise will not entail an overreliance on cost containment and other gimmicks, but obviously you can only be so optimistic after Waxman-Markey. So if we take your point that offsets and assorted garbage will make their way into the bill, does that mean we need to spend the carbon revenue on clean energy? Maybe, but I think you have to be very careful to accomplish more than nothing. The cap sets the level of carbon reduction in the capped sectors, so from a practical perspective spending carbon revenue on deploying more wind farms than the cap otherwise would have compelled will lower the carbon price and a few coal plants will burn more coal or cofire less biomass or whatever to make it up. You could spend the money on pursuing reductions outside the cap though, like protecting international forests, clean development generally, or trying to reduce our emissions in noncapped sectors (like agriculture). And most climate bills do some of this. But if you're spending on clean tech deployment in capped sectors, you're either raising or lowering the national cost of meeting the cap, but probably not contributing extra reductions beyond the cap. And I'd be generally skeptical, outside of addressing certain market failures such as transmission capacity and information problems with efficiency, that a broad program of energy deployment would really deploy resources more efficiently than private actors investing with their own money. I could be missing part of your plan though. How do you see your deployment program interacting with the cap itself to exceed it? Posted by: Max Epstein at April 20, 2009 6:18 AM

Hi Jesse, Thanks for your insightful blog and publicizing our report. Just a minor point, but the percentage of emissions allowance that can be met by offsets steadily rises over time (see the figure). So by 2050 offsets can equal 2/3 of emissions allowances. Realistically, this doesn't make sense, because by 2050, one would expect source countries of offsets (India, China, Brazil) to also be reducing emissions, either through international agreements of their own domestic legislation. But this is what the bill allows! Posted by: Payal Parekh at April 20, 2009 9:58 AM

Hi Payal, thanks for your work on this report as well. Excellent analysis. Yes, I noticed that the level of offsets allowed is set in absolute terms, not as a percentage of required allowances, which would make the volume of offsets allowed decline proportionately over time as the cap goes down (and would make more sense). Seems crazy to think we'd be able to find 2 billion tons of good reliable offsets today, let alone in 2040 or 2050 as you point out. Thanks for the comment. Posted by: Jesse Jenkins at April 20, 2009 10:30 PM
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Re: Exposed on CSPAN - CAP AND TAX BILL CREATES CARBON DERIVATIVES!!
« Reply #6 on: June 26, 2009, 09:09:39 am »
This bill will cost taxpayers at least $650 billion or more in higher energy bills and gas over next eight years according to Dr. Paul.

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Re: Exposed on CSPAN - CAP AND TAX BILL CREATES CARBON DERIVATIVES!!
« Reply #7 on: June 26, 2009, 09:10:42 am »
FROM INTERNATIONAL RIVERS (BTW - if you are going to comment agreeing with their assessment of the insanity in adding a derivatives swap system in an environmental bill, I suggest going easy on them about the whole climate change/global warming snake god operation, we were all blind once):

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Waxman-Markey Bill: No Cuts until 2026!
http://www.internationalrivers.org/en/node/4223
Wed, 04/15/2009 - 9:09am




While there is much to praise about the American Clean Energy and Security Act of 2009, the climate section of the draft bill is seriously weakened by its heavy reliance on offsets to substitute for actual emissions cuts by large polluters.


Take a look at the initial analysis by International Rivers and Rainforest Action Network of the offsets provisions in the draft bill, or read below for the highlights.

The bill eventually caps 85% of all US greenhouse gas emissions, mainly from fossil fuels and industrial processes. But a polluter can purchase an offset "credit", essentially a permit to pollute beyond the cap. The offsets can be purchased from sectors in the US not subject to emissions caps (such as farming, ranching, forestry and landfills) or from developing countries. The bill allows up to two billion offsets each year (one billion domestic, one billion international) - each supposedly an avoided emission of one metric ton of carbon dioxide. This is equivalent to almost 30% of 2005 emissions!

The rationale is that since there is only one atmosphere, it doesn't care where the emissions occur. The problem is that it is not possible to ensure the additionality of these credits - i.e. "that every credit represents real, measureable, and long-term reductions in emissions," as concluded by the Government Accountability Office in a November 2008 report (see our earlier blog). Our analysis of the Clean Development Mechanism (CDM), the world's largest carbon offset scheme, suggests that upwards of 75% of projects that received offsets were not additional.

The draft bill establishes a regulatory structure that is based upon the CDM's approval process. But experience with the CDM indicates that such a regulatory structure is unlikely to ensure that most offsets represent real emission reductions. Furthermore the shear number of offsets that the draft bill allows is almost seven times larger than the CDM expects to generate annually between 2008-2012. In order to meet potential demand, the US system will be under pressure to favor a speedy and unrigorous approvals process.

What does this mean in terms of greenhouse gas emissions? If polluters indeed use the maximum allowable number of offset credits, domestic emissions in 2012 would increase by 38% rather than decrease by 3%, the reduction that the cap sets. Emissions would not dip below 2005 levels until 2026, 17 years from today (see Figure). If all eligible offsets were used, the 20% reduction supposed to happen by 2020 would not actually be reached until 2036. The reduction in 2050 would be only 50% rather than the stated 83% (see Figure). These reductions are clearly not enough to prevent global temperature from rising by more than two degrees Celsius (3.6o F), a threshold that many scientists believe will lead to dangerous consequences, if crossed.

The energy provisions in the Waxman-Markey bill could lead to the urgently needed transformation in how the US produces and consumes energy. Unfortunately the offsetting provisions in the climate action part of the bill considerably weaken its potential to drive down US emissions to the levels necessary to avoid climate chaos. Fortunately the Waxman-Markey bill is only a draft and can still be saved. Removing offset provisions from the bill, or significantly curtailing them, would prevent offsets from undermining the environmental integrity of the bill.
All eyes are opened, or opening, to the rights of man. The general spread of the light of science has already laid open to every view the palpable truth, that the mass of mankind has not been born with saddles on their backs, nor a favored few booted and spurred, ready to ride them legitimately

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Re: Exposed on CSPAN - CAP AND TAX BILL CREATES CARBON DERIVATIVES!!
« Reply #8 on: June 26, 2009, 09:19:59 am »
From the comments on the Mother Jones article:
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Submitted by shane menken on June 8, 2009 - 11:11am.

First, we need a simple carbon tax to allow the government to cooerce business into not polluting. Then we need citizens to quit accepting pollution. But, it might be to late. They way I understand this whole cap&trade thing, is that the pollution becomes a market-valued commodity, a corporate asset that can be exchanged in a market place for capital/value.

Enter NAFTA, especially Chapter 11 about government "takings". This prohibits deeply a governments ability to enforce its own laws if the result is a loss in corporate profit. So how can one ban pollution if the ability to produce and trade that pollution is a market-valued commodity, and limiting would be a "takings".

Ouch, is all I can say.

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PEOPLE ARE AWAKE ALL OVER THE PLACE! THIS BILL WILL CREATE MORE POLLUTION AS GOVERNMENT AGENCIES WILL NO LONGER HAVE JURISTICTION, THE FAKE MARKET AND THE TYRANNICAL CONTROL GRIDS WILL!

This is a ponzi scheme using the environment to create a fake industry that will be expanded then destroyed by the same international banking elite that just stole $13 Trillion from our unborn childrens' returns on labor.
All eyes are opened, or opening, to the rights of man. The general spread of the light of science has already laid open to every view the palpable truth, that the mass of mankind has not been born with saddles on their backs, nor a favored few booted and spurred, ready to ride them legitimately

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Re: Exposed on CSPAN - CAP AND TAX BILL CREATES CARBON DERIVATIVES!!
« Reply #9 on: June 27, 2009, 10:14:56 am »
How long do you think the One-two child policy will be enacted?

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