Why is there such a mad rush to introduce a Carbon Cap and Trade scheme, as we watch the goings on during the proposed introduction of the Waxman – Markey Bill.
The Environmental protection Agency (EPA) is having Carbon Dioxide (CO2) declared a dangerous pollutant, and for heavens sake, it’s what we all breathe out, in fact 2.3Billion tons of it each year, and it’s what every green thing on the Planet needs for its survival.
However, why the EPA is declaring it a dangerous pollutant is so that they can use the Clean Air Act legislation to impose restrictions on those sectors of industry that emit CO2 as part of their process. The largest of these are those coal fired power plants, and they emit almost 30% of the total CO2 on Earth. This declaration will enable this Carbon cap and trade Waxman – Markey Bill.
So then. How will it do that?
I’ll only deal here with the electrical power generation industry, because that is where I have been concentrating for so long now.
First it will impose an emissions cap on those coal fired power plants, and effectively, it will lower that cap each year, the intent here being to drive those plant operators to offset their emissions by investing in generating power from renewable sources.
Two schools of thought exist on how the trade part of the scheme will work.
President Obama himself, during the election campaign, said categorically that he leans in the direction of a 100% auction of the credits at the outset, and then the market will set the price of those credits as those plants that emit the CO2 will enter competition to buy more credits, if ever they need to exceed the cap, and not be subject to extra costs for doing so. He also said that the credits might start at around $50 per ton, and then go off the map (on the high side he stated) up to even $500 per ton.
This is patently ‘pie in the sky’ because where a similar scheme is in place now in Europe, those credits started out close to that $50 level, and instead of being competitive, the only direction they have gone is down, and by down, I mean they went almost immediately down below $20, and instead of stabilising and then climbing, they steadily dropped, and now with the bottom falling out of the World Economy, those credits are now virtually worthless, in the vein of junk bonds.
So, the idea of a 100% auction for all the credits has flaws that have become patently obvious.
The second school of thought was that those coal fired power plants be allocated for no cost a certain number of credits, and that the rest be sold into the market where they can be bid upon. Green technologies will be given the credits, and as (hopefully) the price rises, they become attractive to emitters, effectively meaning emitters buy those credits from the green Companies, thus stimulating investment in them, and alleviating that expense for the Governments themselves, be they State or Federal.
Again, the same market crash for these credits will be the only result here. So, theoretically, plants will have a certain number of free credits that they can then trade at market value, and buy more of them as they need them.
It all sounds complicated, and in a way, that is where those who seek to implement this scheme have the advantage. All they need to do is to rake in the money.
The intent is that smaller firms that have green technologies will become attractive, and those firms will be seen by the emitters as a way to offset their own emissions, hence they will invest huge amounts of money in those green firms to buy their credits. This helps spur investment in green technology without the Government having to do it, thus effectively driving the switch to those renewable sources of generating electrical power.
So, in these current economic times of hardship. Why is there this mad rush to implement something that is going to add further and huge costs to those power plants?
Because of the income that it will generate for the Government, that’s why.
Currently in the U.S. those power plants emits just on 4.5 Billion tons of CO2 each and every year. Just over 3 Billion tons of that comes from the coal fired sector alone, and those other plants that burn other fossil fuels including Natural Gas make up the remainder of that total.
At President Obama’s starting point of $50 per ton that means a generated income each year just from the electrical power sector of $225 Billion.
Now perhaps you can see why this Waxman Markey legislation is such a priority. It has nothing to do with the environment. It’s only about the money.
Keep in mind that this is just from the electrical power sector, 30% of the overall emissions total, so that amount now from all sectors to $750 Billion. See how attractive a number that is for the Government.
This is also why there is debate, not about the implementation, but about something else again, and that’s why the title itself is Carbon Cap and Trade, or by just turning your head a little in a new direction, Carbon Cap and Tax, and there is a difference.
You see, Carbon Cap and Trade generates income one time, at the sale of the original credits, and then, purportedly by market forces alone, when those credits get traded.
The only income for the Government after that will be from the Cap part of the title, because if those plants exceed their Government instigated cap, then they pay for doing so. This also gives an idea in to how that cap itself can be effectively used as a source of income. Set it low at the outset, and the plants will have to exceed the cap, and pay the extra, and then, as we are told, they will lower that cap each year.
However, Carbon Cap and Tax is another thing altogether, because then the Government can obtain that huge income every year.
See the point?
Then the Government can control what comes in and divert some of it to those green technologies, independent of the coal fired power plants themselves.
These renewable forms of generating electricity are currently not attractive because they are fantastically expensive, cannot come even close to replacing the constant and reliable power that coal fired plants produce, and cannot generate a return of their original outlay in the lifetime of the plant, while the electricity they do produce is sold to the grid for what averages between seven and ten times the cost of coal fired power. What that means that if there is a concerted push towards renewable power, then consumer power bills will become astronomically higher. To that end, they are subsided with enormous amounts of Government money already, one of the main reasons that these plants are actually being constructed in the first place, so that those doing the construction have access to huge amounts of Government money.
You may think this Carbon Cap and Trade Bill is aimed at the coal fired power plant operators, but, as already exists in legislation, those costs will be passed directly down to the consumer, each and every one of us.
Because of that, there will be a direct cost in the form of an increase to your electrical utilities bill, and that increase will be in the vicinity of between 40 and 60%. So, take out your last power bill, and add half as much again to it, and that’s a conservative amount. There will also be an indirect extra, because only 38% of electrical power is consumed by the residential sector. Those other 2 major sectors, Industry and Commerce, and the minor sector, Transport, all of them users of vast amounts of electrical power, will also be slugged by the same increase across the board, and to cover their costs, they will also pass down the increased costs in increased prices on everything you purchase, and every service you use.
President Obama also said in the run up to the election that he needs to force the people to change the way they consume electricity, but as I have effectively shown in earlier posts, any changes you make will be tiny, and in fact less even than tinkering at the margins, and will result in no real change to the consumption of electricity, at a residential level, or on an overall level.
So, with costs passed directly to consumers, then those power plants will just keep humming along as they always have.
Legislation might be introduced as part of the bill to try and push incentive back on those plants to only pass part of the costs down to consumers, so that they will be forced to either run at reduced capacity or offset their emissions by diversifying into green forms of generating power, but there is also provision made and detailed in the U.S. Government’s own authority for electrical power, the Energy Information Administration that as soon as it becomes uneconomically viable for a power plant to remain in operation, then that plant should be shut down.
Bean counters at every plant will be tallying up the numbers, and if staying open means huge extra costs, then those plants will just close down completely, and it only takes a week or so for a plant to shut up shop. To construct any new plant of any sort at all, even those renewable plants, well that can take anything from seven to ten years, if all the Planets are in alignment and everything falls neatly into place.
If plants shut down with nothing to replace them, then you be the judge of what happens then. Lights will just wink out all across the Country, because there is nothing there now at all to take up the slack, and any ‘new’ power at least a decade away..
A second thought is that even proposing the introduction of this bill shows the Governments real intent. It is in their interest to keep those coal fired plants operating and operating almost at peak efficiency, because they will be relying on the money to (a) keep money rolling into Government coffers, or (b) keep driving investment in those renewable sources for generating electrical power. Either way, they’re only doing it for the money and couching it in terms of the environment to make it palatable.
No this is just a blatant new tax, cleverly disguised as being in the interests of the environment.
As I have said along, this has nothing to do with the environment. It’s just about the money.
