Thursday, July 2, 2009

Cap, Trade & Calculations

To repeat that which bears repeating ad infinitum, cap and trade is the single most ill advised piece of legislation quite likely ever in our nation's history. Cap and trade is not a "green" bill. It will do nothing to reduce global temperatures - though the sun has taken care of that for us these past seven years. Cap and trade is a massive regressive tax, it is an attack on business, and it is a vehicle for a massive power grab by the left side of our government.

Today, Robert Zubrin at Roll Call does some 'back of the envelope' calculations on the real costs of the cap and trade bill. It is a must read. As he notes, the cap and trade bill portends to be "a massive and highly regressive tax on the U.S. economy, and could potentially cause not only extensive business failures, unemployment and privation within our borders, but starvation among poorer populations elsewhere."

This from Mr. Zubrin:

. . . According to a report issued by the Environmental Protection Agency in April, by 2015 the price of carbon emission indulgences required by the bill for industries to operate could be expected to run between $13 and $17 per ton of CO2 emitted. . . . That said, let’s stipulate the $15/ton midrange of the EPA estimate, and see what it implies.

The United States emits about 9 billion tons of CO2 per year. Therefore, at a rate of $15/ton fee for emission indulgences, the bill would impose a tax of $135 billion per year on the nation. Divided by the U.S. population of 300 million, that works out to a cost of $450 per year levied on every American man, woman or child, or $1,800 for a family of four. While for wealthy individuals like Al Gore such an impost might represent a mere pittance, for working families struggling hard to make ends meet it would be a very significant burden.

But that is not even the worst part of it. As a result of the markup of carbon costs, a lot of those working families will be out of work and unable to pay their existing bills, let alone new ones. Consider: Burning one ton of coal produces about three tons of CO2. So a tax of $15 per ton of CO2 emitted is equivalent to a tax of $45/ton on coal. The price of Eastern anthracite coal runs in the neighborhood of $45/ton, so under the proposed system, such coal would be taxed at a rate of about 100 percent. The price of Western bituminous coal is currently about $12/ton. This coal would therefore be taxed at a rate of almost 400 percent. Coal provides half of America’s electricity, so such extraordinary imposts could easily double the electric bills paid by consumers and businesses across half the nation. In addition, many businesses, such as the metals and chemical industries, use a great deal of coal directly. By doubling or potentially even quadrupling the cost of their most basic feedstock, the cap-and-trade system’s indulgence fees could make many such businesses uncompetitive and ultimately throw millions of working men and women onto the unemployment lines.

A gallon of petroleum-derived liquid fuel produces about 20 pounds, or 1 percent of a ton, of CO2 when burned. But it takes about 1.5 gallons of oil to produce one gallon of refined liquid fuel. So a $15/ton tax on CO2 emissions will also cause an increase in the price of gasoline, diesel and jet fuel on the order of $0.22/gallon. This will not only hit consumers’ pockets, but increase transport costs throughout the economy, thereby disabling businesses and increasing unemployment levels still more. While harming the economy, such a gas tax will do nothing material toward the truly essential goal of decreasing America’s dependence on foreign oil. Indeed, the bill’s dramatic hikes in electricity costs will have the opposite effect, since only 3 percent of America’s electricity is derived from oil, and by forcefully increasing electric power costs, the bill will actually discourage adoption of electric means of transport, . . .

But all these bad aspects of the Waxman-Markey bill pale before its potential impact on the world’s food supply. America’s agricultural sector is one of the greatest success stories in human history. In 1930, hunger still stalked the entire globe. Not just in Africa, India and China, but even in Europe and America, the struggle to simply get enough food to live on still preoccupied billions of people. Since 1930, the world population has tripled. But instead of going hungrier, people nearly everywhere are now eating much better. This miracle is the work of American farmers, who have not only produced huge surpluses to feed the world, but used the income gained from such good work to pioneer ever more advanced techniques that have enabled farmers everywhere to grow more. . . . But this miracle depends upon the availability of cheap fertilizer and pesticides, which in turn require carbon-based process energy to produce. If you tax carbon, you tax fertilizer and pesticides. If you tax these things, you tax food, and by no small amount. A $15/ton CO2 tax would increase fertilizer production costs directly by about $60/ton, with the cap-and-trade bill’s increased transport costs inflating the burden still more. That’s enough to make many farmers use less fertilizer, and less fertilizer means less food.

To get a sense of what it would mean for farmers to abandon fertilizer, it is only necessary to go to the supermarket and compare the price of the “organic” produce, grown without chemical fertilizer, to the regular produce, which, while just as nutritious, typically costs less than half as much. . . .

In the 220 years of our republic, there may have been worse pieces of legislation enacted by Congress than the Waxman-Markey bill, but none readily comes to mind. The Senate needs to take a stand and stop this disastrous act from passing into law.

Read the entire article. (H/T Gateway Pundit)


Update: See also this from Forbes, Waxman-Markey Flunks Math:

In the U.S., electricity is produced from . . .:

48.9% -- Coal
20% -- Natural Gas
19.3% -- Nuclear
1.6% -- Petroleum

Got that? A tick over 88% of U.S. electricity comes from three sources: coal, gas and nuclear. Petroleum brings the contribution of so-called "evil" energy--that is, energy that is carbon- or uranium-based--to almost 90%.

The remaining sources of U.S. electricity, the renewables, are, by comparison, tiny players:

7.1% -- Hydroelectric
2.4% -- Other Renewables
0.7% -- Other

Hydroelectric accounts for 70% of renewable energy in America. But, of course, hydro is mostly tapped out. Almost every dam that could be built has been built. Ironically enough, political opposition to building more dams comes from the same crowd of tree huggers who oppose coal, gas and uranium.

Do you see where I'm going?

The Waxman-Markey bill that passed the House on Friday by a 219-212 margin will punitively tax energy sources that contribute 90% of current U.S. electricity (or 71% if you want to leave out nuclear). The taxes will be used to subsidize the 10% renewable contributors (but really just 3% after you leave out hydro).

In other words, Waxman-Markey is betting the future of U.S. electricity production on sources that now contribute 3% . . .


If passed, I have no doubt that cap and trade will ultimately be repealed, but not before doing untold damage to our economy that might take decades to repair. And the people who ultimately will pay the highest price for this epic boondoggle will be the poor and the lower middle class. The intelligentsia of the left speak of populism and concern for the poor, but the reality is that they value power above all, irrespective of who suffers as a result of their acts. Controlling carbon allows the left to expand their power into every aspect of our economy and our life. If you doubt Speaker Pelosi's honesty when she said that, to control carbon, the left had to examine "every aspect of our lives," then just look at what else is in the cap and trade bill. This from Doug Ross, discussing some of the ancillary provisions in the House Cap and Trade bill:

It creates hundreds of new bureaucracies that benefit Obama's contributors; for example, it creates a "Development Corporation for Renewable Power Borrowing Authority" that issues "Community Building Code Administration Grants" under a "Low Income Community Sustainable Development Capacity Grant Program". This scam serves two purposes: it rewards failed housing programs like those run by Presidential Adviser Valerie Jarrett; it also provides yet another spigot of funds -- in blocks of $1,000,000 -- for groups like ACORN.

• It creates and regulates every building code in the country and will purposefully overrule any "city, county, parish, city and county authority, or city and parish authority having local authority to enforce building codes and regulations and to collect fees for building permits."

• It reaches into every neighborhood by eradicating "any private covenant, contract provision, lease provision, homeowners' association rule or bylaw, or similar restriction" to force localities to accept "green technologies" whether it fits in the neighorhood or not.

• It touches every aspect of water and sewer systems by regulating every "residential water efficient product or service"; ensuring those offerings are rated and forcing state government, local or county government, tribal government, wastewater or sewerage utility, municipal water authority, energy utility, water utility, or nonprofit organization to comply. . . .

• It defines "energy-efficient mortgages" (with our favorite GSEs, Fannie Mae and Freddie Mac, so what could possibly go wrong?) that artificially boosts the income of the borrower based upon how much "green technology" is employed. In other words, the Democrats are socially engineering mortgage underwriting standards again, just as they did in the nineties, which will lead to yet another financial disaster. . . .

Read the entire post. God help us if the Senate now passes this utter abortion.

(Cartoon H/T - No Oil For Pacifists)

Welcome, EU Referendum readers.


Paul_In_Houston said...

If this thing passes, these people will have blood on their hands.

Becoming unemployed, in the economy they are creating, is not just a "minor inconvenience"; it is lethal.

As in it actually KILLS people.

What ELSE would you expect for someone who has lost EVERYTHING and is reduced to living under a bridge?

But, it probably wont be a problem to those who vote for it, if THEIR biggest headache is the price of arugula or wagyu steak.

The consequences of their actions are totally beyond their ken.


Paul_In_Houston said...

Follow-up to the Jeremiad I posted above...

I truly believe that for lot of people, economics has an abstract quality to it (even as they desperately try to make ends meet) that let them grasp "hardship", but not necessarily "life and death" in relation to it.

Try and explain to them that they could truly DIE from it, and they will probably look at you as if you were speaking in South Martian.

Who was the Dickens character always saying "Something will turn up"?

That's the kind of unspoken faith they seem to have.

I could sure use that kind of faith right now, but I doubt I'll find it.


OBloodyHell said...

> While for wealthy individuals like Al Gore such an impost might represent a mere pittance, for working families struggling hard to make ends meet it would be a very significant burden.

Not that I doubt this, but I would like to know the response -- purportedly the bill also includes a "refund" of a certain amount which is intended to negate (i.e., buy off) the poorer segment of the population so that they won't "suffer" as a result of this abortion.

How does one effectively dispute or otherwise negate this claim?

OBloodyHell said...

> Who was the Dickens character always saying "Something will turn up"?

That's the kind of unspoken faith they seem to have.

I think the problem here is much more the apocryphal (and never actually said) "Let them eat cake".

GW said...

The bill does contain a refund provision to offset the cost of rising electricity bills for the poor. That said, the rise in electricity bills is only one part of the damage this bill will do. It will quite literally drive up the cost of everything in America. So while Joe Sixpack may pick up an extra hundred a month to keep his double wide warm, he is going to be paying far more than that for gas, beer, food, etc. And that is just the "cap and trade" portion of this boondoggle.

In the real long term, the problem is it will destroy our domestic energy industry. It wars on oil and coal, which means not only will new plants not be built, old plants will not be replaced.
There is huge funding for using alcohol based fuels, but that has already had serious consequences for agriculture at just the present level. We are already in a world food shortage. There are just so many unintended consequences to this bill, it boggles the mind.

They have cap and trade in Europe and it has driven up prices, but it is in its early stages and has been incrementally applied. It is set to become ever more draconian with each passing year - as is our cap and trade bill. Indeed, in its first three years, carbon emissions actually increased under the EU plan because so many indulgences were given away. In short, their pain has yet to really begin. If you want to see where we are headed, just follow the blog EU Referendum.

MK said...

I just hope people out there are seeing it for what it is and that it spells the death knell for hussein o at the next election.