David Rodeback's Blog

Thursday, July 2, 2009

A Cap and Trade Primer (Part One)

Why I felt well represented last week. The basics of cap and trade. A host of false assumptions. A video gem from the ACLU. (No, really!)

A Personal Note

Do you mind if I offer a personal note before the promised primer? On Saturday I had an experience to which I am unaccustomed: I felt well represented by my congressman, Democrat Jim Matheson. Ordinarily, I don't even feel well represented, where Utah's 2nd Congressional District is concerned, by candidates from my own Republican Party, which seems to be constitutionally (small c) incapable of producing an effective candidate in my district. On the other hand, I have long admired Matheson's political acumen, where running a campaign or a congressional office is concerned. I'm just not accustomed to feeling well represented by a member of Nancy Pelosi's caucus.

Here's what happened: I looked up his vote on the disastrous cap and trade bill the House narrowly passed Friday evening, the American Clean Energy and Security Act (H.R. 2454). Matheson voted nay. How he would have voted if his vote had been decisive is an open question, but let's just assume that he voted his conscience on this one -- his political conscience, at least. Surely he knows that we in Utah get a lot of our electricity from burning fossil fuels (coal and natural gas), and that this legislation therefore poses a major threat to Utah's standard of living.

We'll see how the bill does in the Senate. I'm optimistic, but far from certain, that it will founder, as many bills do there -- especially if someone actually reads it, which apparently did not happen in the House. (It's hard to read an enormous bill when you only have a few hours before the vote -- just as it's hard to imagine why sensible adults would vote on a major bill they haven't read. I know, I know. You laughed when I said, "sensible adults" in this context.)

Cap and Trade, Generally Speaking

Here's a concise explanation of the cap and trade concept from Wikipedia. It's also known as emissions trading:

A central authority (usually a government or international body) sets a limit or cap on the amount of a pollutant that can be emitted. Companies or other groups are issued emission permits and are required to hold an equivalent number of allowances (or credits) which represent the right to emit a specific amount. The total amount of allowances and credits cannot exceed the cap, limiting total emissions to that level. Companies that need to increase their emission allowance must buy credits from those who pollute less. The transfer of allowances is referred to as a trade. In effect, the buyer is paying a charge for polluting, while the seller is being rewarded for having reduced emissions by more than was needed. Thus, in theory, those who can easily reduce emissions most cheaply will do so, achieving the pollution reduction at the lowest possible cost to society.

That seems to make sense, doesn't it? At least theoretically? It gets the polluters paying more and the greener companies reaping some rewards.

Unfortunately, a lot of things that make sense in theory don't make sense in practice, when put in the hands of humans, especially governments.

A Few Details

I haven't read H.R. 2454 in its entirety either, but I've heard and seen numerous reports to the effect that it would cap carbon dioxide emissions at a three percent reduction from 2005 levels by 2012, a 17 percent reduction by 2020, and an 83 percent reduction by 2050 -- roughly, I have heard, the level of our carbon dioxide emissions 100 years ago. The oil and natural gas industry and electricity producers would be required to purchase the right to emit a certain amount of carbon dioxide. Those who don't use all their "allowances" could sell them to other entities who need them.

The increased expense of delivering energy, due to the need to purchase allowances or to switch to more expensive, greener fuels, will naturally be passed on to the consumer. As we began to see to a limited extent when gasoline prices hit $4.00 per gallon and diesel prices went even higher, higher energy costs make everything more expensive. And imagine the additional cost of the new bureaucracy that will have to be created to administer, monitor, and enforce all of this.

In the bill itself, a significant percentage of the allowances will be awarded free, at least for while. Imagine the lobbying and the political favors which that will encourage. Meanwhile, it's a basic principle of economics that giving someone something free doesn't eliminate the cost; it just relocates it. The way we got that in Economics 101 was "there's no such thing as a free lunch." In the end, all the costs will be borne by the consumer and the taxpayer, one way or another.

False Assumptions

We're supposed to believe that this bill is a desperate attempt to save the planet, while there's still time. I believe that the desperation is in Washington, which is eager to pay for its outlandish spending (past and future) with the hundreds of billions of dollars generated by this energy tax, and which doesn't much care about the economic damage it inflicts along the way.

How well this bill would meet its stated goal of saving the planet is a question for another blog post -- coming soon, I hope. Here, however, let's give . . . whomever . . . the benefit of the doubt and look at circumstances in which cap and trade would make sense.

If each of the following conditions actually existed -- note the subjunctive -- effective cap and trade legislation might make sense. I suggest that none of these conditions exists. Why I would think such a heretical thing is too large a topic for this post, but I will offer a few notes. Remember, the basic theory is that increased carbon dioxide emissions lead to increased levels of carbon dioxide in the atmosphere, which causes the atmosphere to retain more of the heat it gets from the sun, which raises temperatures globally, which melts polar ice caps and drowns us all -- except that I'm exaggerating this last point. (It must be okay. Movies do it.)

• Global warming is real. I believe it is real sometimes. But I'm hearing that temperatures peaked in 1998 and have been receding since then, so it may not be real now. In truth, it appears, these things are cyclical. When I was a child, the scare was global cooling and a new ice age, for which we supposedly are far overdue. By the way, have you noticed that we tend to hear about "climate change" now more than "global warming," as if the last decade of data is beginning to sink in even on the left?
• Global warming is an ongoing trend. We can really only judge this in retrospect; remember, we have trouble predicting tomorrow's weather. Right now, climate change looks cyclical. And if we're entering a cooling cycle, and if we can really make much of a difference anyway, that would make all our anti-global-warming measures exactly the wrong thing to do.
• Global warming will be devastating if we do not reverse it. As far as I can tell, only the most radical alarmists are claiming that the polar ice caps will melt entirely anytime in the next few centuries. But what if they did? We don't have to worry about the North Pole much, because all that ice is floating in the ocean. Put an ice cube in a glass of water and mark the water level. Then let the ice cube melt. Check the water level, and you'll know what I mean. The southern polar ice cap is on land, so its melting would raise ocean levels. Do some research and some math. Calculate the approximate volume of ice at the South Pole. (Remember, there's a lot of land under there, too.) Then determine the smaller volume of water the ice will produce when it melts. Then calculate how much the oceans will rise if all that water flows into them. Remember, the oceans cover more than two-thirds of earth's surface. I think you'll see that even the worst-case scenario is pretty mild.
• Global warming is primarily anthropogenic (human-caused). One side of this debate wants you to believe that there is scientific consensus about this, and they are so adamant about it that they have done some highly unscientific and unethical things to try to enforce that consensus and to silence detractors. In other words, it's not science any more; it's dogma. Even if it were true, I suggest that the safe course would be to disbelieve anything posing as science which tries to suppress dissent and enforce consensus. Science is only science if it welcomes, not suppresses, doubt and inquiry. There's not even consensus among serious scientists about Einstein's basic theories, which we've been testing for about a century now. And I know some engineers who will tell you that Bernoulli's Principle doesn't have very much to do with airplanes' ability to fly. More than a few scientists are saying that fluctuations in the sun's radiant energy have far more to do with climate change on earth than any human activity does.
• We can reverse global warming by radically curtailing and transforming our economic activity. This assumes that global warming is primarily anthropogenic (probably false), and that our efforts will either change the world significantly without other nations' cooperation or that they will all follow our excellent example and trash their economies too. Unilateral disarmament is a bad and dangerous idea where nuclear weapons are concerned. It's a worse and more dangerous idea where national economies are concerned.
• The earth, a highly complex biological system, is incapable of compensating for increased levels of carbon dioxide (which plants consume and animals produce). Doesn't it make sense that more carbon dioxide would encourage plant growth? Don't forget, by the way, that plants produce oxygen, which animals (including humans) consume.
• Our national economy is so robust that now is a good -- or at least a safe -- time to weigh it down with draconian anti-global-warming measures. You don't believe this any more than I do, I suspect.

Let's Have Some Fun with This

All that is very serious, which is fine. It's a serious topic. And climate-change-as-dogma-that-trumps-all is a serious threat to freedom, prosperity, and, for all I know, our desperate need to act now to avert the coming ice age. (I think there are movies about that, too.) But let's conclude by having a little fun with the topic. It will be fun with both an edge and an objective; I hope that's okay.

The EPA and that occasional bastion of bad science, the US Supreme Court, apparently have decided that carbon dioxide is a pollutant. (By the way -- and this is not funny -- this may mean that the EPA can impose cap and trade on its own, without additional legislation.) When will we see a massive class action lawsuit against the government, for attempting to curtail the supply of what plants breathe? Don't we love trees, grass, and bushes? I do. I have fond feelings for algae, too, since it produces a lot of earth's oxygen. When are we going to hire all American plant life a lawyer and get this thing going? How would you feel if the plant kingdom declared oxygen a pollutant and set about to reduce it?

I've been going to the gym regularly lately, doing my three miles or so on a treadmill (uphill both ways). If humans really are the carbon dioxide problem, shouldn't my emissions be capped? I put out a lot more carbon dioxide than a couch potato, after all. I should have to buy some of the couch potato's carbon credits, shouldn't I?

Of course, I'm assuming that we're looking at carbon dioxide emissions as a separate issue. We're probably not. It's at least connected to health care; Washington may want the money from the energy tax to fund its takeover of medical care. So let's talk about cap and trade in medical care. These thoughts suggest themselves:

• Maybe I should have to buy obesity allowances from some skinny person.
• What about sodium and fat allowances? I intend to have pizza for lunch. Should I have to purchase extra allowances from you, which you can sell because you're eating raw, unadorned celery and unsalted rice cakes for lunch?
• Maybe you should have to buy my extra calorie credits, because you're drinking soda and I'm drinking water.

Maybe my need for extra carbon credits due to exercise will be balanced by my not needing all of my couch potato credits. I don't know. I'll have to ask my bureaucrat.

Okay, that was fun, at least for me. But if you think this this good fun is completely outlandish, you may not be in the right mood for the times. If government pays for health care, it can logically justify intervening in just about every aspect of human life. (Here's a thought: reading my recent primer for aspiring tyrants might get you in the proper mood for the times.)

One More Thing to Get You in a Mood

Finally, here's a morsel of multimedia for you. It's from the ACLU. It's delightful. Thanks to Representative John Dougall for pointing it out at Facebook. Here the ACLU is opposing the idea of a national ID card or number or whatever, because of the tyranny it will foster.

I'm on the other side of this one. I happen to think (a) we need such an ID, in part for immigration enforcement; (b) we're already getting the tyranny even without a formal national ID; and (c) it's relative child's play to limit access to the portions of a database which users should be allowed to see, so the cause-and-effect connection between having a national ID and the potential tyranny portrayed here is fanciful and unnecessary.

My point in suggesting that you watch this short video is more general and two-fold: government intrusion into private lives (read that "freedom") quickly and naturally becomes excessive; and there's a certain air of unrestraint in these matters right now.

Yes, yes, the video is from the ACLU. But it's okay. I promise. And it's hilarious. Or terrifying. Or both.

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Copyright 2009 by David Rodeback.
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