Energy & Environment

Carbon Cap and Trade

Nearly a decade ago, now Speaker of the House Nancy Pelosi pushed the Central Intelligence Agency to move our satellites to monitor environmental problems rather than other threats — such as terrorism — she deemed less worrisome after the end of the Cold War. In particularly, she wanted to spend more time looking at global warming, a sentiment shared, according to former DCI Tenet’s recent book, by the then Vice President Al Gore.

Global warming alarmists are now pushing a scheme that will transfer money to the rich from the poor, dramatically increase energy prices, increase taxes, cause actual harm to the environment, eliminate Americans jobs and assist America’s strategic adversaries to build more energy production facilities. Large investment banks are adopting it. Brokers are seeking to cash in of what some suggest will be a $72 billion market by 2010.

It’s called “carbon cap and trade”. This involves Al Gore paying others to plant trees and use alternative energy sources that do not produce carbon dioxide and other greenhouse gases. Others thus produce energy more efficiently so he can continue to fly in private jets coast to coast while producing the bad “greenhouse gases” that cause global warming that is going to destroy the earth. And companies too can get into the act. Even those who have already installed advanced and more energy efficient technologies can demand that despite having done so because of ordinary market forces, they should be given credit after the fact for also ‘reducing carbon dioxide”.

To make this work, companies and countries have to be able to know what they are polluting at some point, determine what they should be allowed, and then figure out the difference. This they can then sell at some $5-30 per ton of Co2, for example. This has great potential as a wonderful scam. In China and India, some 800 coal fired plants are scheduled to be built over the next decade. Many of the plants are state of the art, with very advanced pollution control devices.

But guess what? The pollution control devices — often add-on technologies — are not necessarily operating. As a result, mercury, nitrogen and sulfur oxides — measured as C02 equivalents — are spewed into the air. But as soon as cap and trade schemes are adopted for “greenhouse emissions”, then suddenly we will be told how much lower “real” emissions are compared to what countries such as China “are allowed”.

The irony is that if the Kyoto treaty was fully implemented, the decline in world temperatures would be less than 2/10ths of one degree over nearly 50 years at a cost, according to one British study, of some $50 trillion in expenditures in the industrialized countries. Setting up C02 capture facilities in just the United States would require an infrastructure some 2-3 times that of the current refinery, distribution and transportation of petroleum products, whether we are speaking of new coal or natural gas fired power plants.

C02 captured with new technologies can be piped to oil reservoirs where enhanced oil recovery, according to a Princeton university study just released, could double current US oil production. C02 captured with new technologies can be piped to oil reservoirs where enhanced oil recovery, according to a Princeton university study just released, could double current US oil production.

Some C02 is now piped from the US some 280 miles to Canada. One American company, The Babcock & Wilcox Company, is planning to build a demonstration state of the art, 300 MWe, coal power plant in Saskatchewan which will include C02 capture that will be used to produce additional oil in a secondary recover process. A decision to commence construction is expected later this year. The process and technology are largely market driven.

But some want to game the system and ignore market forces and cash in on the global warming hysteria. A state of the art coal fired plant produces in excess of 2-3 millions tons of C02. Thus, for example, China could receive some $90 million per power plant in “carbon offsets” as US companies buy greenhouse gas credits from China because of already put in place energy and environmental technology. So we pay twice. And China develops its own energy resources with our money. As Jackie Mason would say, “What a deal!”

In trying to formulate an energy policy that utilizes the market to the maximum extent possible — despite oil production through OPEC largely being a product of monopolistic nation-states, and natural gas perhaps ending up in the same condition — the US has been hamstrung by barriers to market entry, wrong-headed environmental policies, contradictory and short-sighted subsidies, and media hysteria.

This has been especially true of nuclear and coal generated power which supplies some 70% of our electricity. Some recent campaigns have pushed for natural gas taking up the expected increased in demand as the US population and economy expand which could result in US dependency not only on imported petroleum but natural gas as well.

Others appear to believe some easily adopted magic bullet is available — whether improving CAFÉ standards or building mass transit. The Committee on the Present Danger has made many useful proposals, including making our energy infrastructure less brittle, better subject to market forces and making far more use of domestic US energy resources and technology, which includes coal, nuclear and agricultural resources. [For those readers thinking I am endorsing corn-based ethanol, no. The subsidies required distort the market and even cause worse energy use efficiencies.]

But the cap and trade provisions now being pushed are a swindle. A recent report from the European Union has realized such schemes do not work. For example, firms are paid cash to plant willow trees somewhere in Africa. The trees are eventually cut down for firewood, one of the main fuels in the impoverished parts of the world, and no offsetting C02 is absorbed. At other times, no offset technologies are ever undertaken.

According to a new CBO report brought to our attention by Senator Inhofe, Kyoto risky schemes such as cap and trade will raise taxes some $300 billion a year. The Senator notes such costs are “10 times the cost of the Clinton-Gore tax increase of 1993. And even the Kyoto proponents concede that it would have virtually no impact on the climate”. In short, even if Kyoto was designed to actually fix a real problem, it would a disaster.

There is, of course, evidence methane gas is 23 times as warming as C02. The major sources — land fills, bovine flatulence, and natural gas systems — produce some 66% of this greenhouse bad stuff — yet do we get offsets for killing of cattle herds for steaks and burning our garbage?

Our political classes love “solutions” that do not even fix real problems. Social Security and Medicare combined have an unfunded liability in the trillions. As Fred Thompson has noted here is a problem staring us square in the face but we either deny it exists or we come up with gimmicks. For years, Ben Wattenberg, a supposed demographic expert, advocated greater immigration to solve the social security shortfall.

This only exacerbated the problem as who was to pay the social security costs of the incoming people — to say nothing of the associated health care, education and other economic impacts. The Heritage Foundation’s Robert Rector notes recently that 7 million illegal immigrants would cost the US a net $2.5 trillion if allowed to come into the work force and eventually collect social security.

For terrorism we did much the same thing during the decade prior to 9/11. Terrorism was considered at worst a nuisance. Richard Clarke, the previous so-called terrorism czar in the White House, told the staff of a terrorism subcommittee in the House of Representatives in the summer of 2000 that adopting a “comprehensive counter-terrorism plan” would be “silly”. So too with dealing with Iran. The sole preoccupation of the drive-by media is whether some senior US official is “meeting” or “talking” with similar situated Iranian mullahs and that the US should not under any circumstances use military force to deal with Iran. Again, how serious is that?

The Russians have informed us Mars is also experiencing global warming. Obviously, SUV’s, fossil fuel facilities and the excesses of capitalism have reached the red planet. It must be NASA has been busier than we have been led to believe. In reality, back here on earth, the chief UN Kyoto negotiator notes “emission trading is a fiasco in Europe.” The Financial Times explained in a study that some companies are selling carbon credits simply because they closed a number of plants after making an acquisition. Another great idea — we pay for our own jobs to disappear! One company, Freescale, under the Chicago Climate Exchange, cut its emissions by one-third simply by closing plants.

Legislation introduced by Senator Kerry would ban the construction of new coal plants unless C02 emissions are captured. This means no new coal fired plants can be built in America until 2020 when such capture technology will have been demonstrated and be commercially available. As Kentucky Senator Bunning warned, unless China is included in the new standards, especially as 94 such new plants in the PRC will open this year, “that is not the answer”. In short, Senator Kerry would have us meet the increased demand for electricity not with current clean coal technology — which we have — but with oil or natural gas, 65% and 15%, respectively, of which is now imported.

With natural gas prices rising through the roof as a result, the agricultural and petrochemical sector will find the cost of doing business in the US will become prohibitive. We have not built a new refinery since 1976, and many of those in operation are shut down for repairs and maintenance. The logical result? High energy prices which dampens economic growth and employment. Despite these affects, Senator Kerry argued the US had to approach this issue “with clean hands” to prove our concern was real. Clean hands which translate into lost jobs, lower economic growth, a worsening trade deficit, a dirtier environment and less energy efficiency. In short, Senator Kerry was once again holding the US hostage to some irrelevant “international test” — but this time it will not be just the UN grading the exam, but among others, the Chinese communists themselves.

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