Tuesday, September 22, 2009

Cap And Trade Calamities

Carbon Offsets Do Not Offset the Economic Pain of Cap and Trade
Waxman-Markey proposes a new national tax of historic proportions
Related Links
Farmers' Lost Income from Cap and Trade
USDA's Cost Estimates to Farmers Mostly Fertilizer
Heritage's Research on the Cap and Trade Global Warming Bill

“There’s a point at which you’ve got to ask yourself, what are we doing here? What’s the point?”

That’s Elaine Kamarck, a former Clinton administration official and advisor to then-Vice President Gore, and she’s talking about the Waxman-Markey cap and trade bill. In order to garner enough votes to pass the House of Representatives, policymakers made promises that have groups like Greenpeace questioning the environmental effectiveness of the bill.

One of the most contentious provisions in the bill is the use of carbon offsets to reduce carbon dioxide emissions. Offsets allow carbon-emitting businesses to pay others to reduce their greenhouse gas emissions.

Bob Barr, a columnist for the Atlanta Journal-Constitution, explains: “A manufacturing plant in, say, Gary, Ind., that is exceeding its ‘permitted’ expulsion of CO2, could continue to commit this sin against humanity by paying for a Brazilian farmer to plant some trees in the rain forest. A more patriotic company might achieve the same result by paying an Iowa farmer to implement more ‘Earth-friendly’ farming practices. Of course, to guard against some nefarious polluter trying to cheat Uncle Sam and the world by claiming bogus ‘offsets,’ here must be a monitoring mechanism. Enter the ‘Offsets Integrity Advisory Board’—yet another group of scientific ‘experts’ that would be tasked with compiling a list of qualifying offsets around the globe.”

Section 731a of the Waxman-Markey cap and trade bill creates this independent “Offsets Integrity Advisory Board” to help the administrator make decisions about the appropriate regulations. The board authorizes sector-specific allocations of international offset credits—which are highly vulnerable to politicization.

Proponents of cap and trade are trying to convince farmers that they will be the big beneficiaries of a carbon offset program because farmers can use cleaner technology, reduce nitrous oxide emissions, or simply not grow crops. But because so many sectors can take advantage of the carbon offset program, there will be little left for farmers. Page 60 of the Environmental Protection Agency’s analysis of the Waxman-Markey cap-and-trade bill is projecting that most of the domestic offsets will come from forestry and growing trees. The reality is farmers use a lot of electricity, a lot of diesel fuel, and a lot of natural gas-derived chemicals and fertilizers to grow crops and maintain their farms. So it shouldn’t be surprising that a cap and trade program that artificially drives up the cost of energy will unfavorably affect farmers.

If it sounds silly and fraught with fraud, it is. Even with an “Offsets Integrity Advisory Board,” offsets are difficult to monitor and regulate. They are also very easy to manipulate. For example, a country could build a coal plant and say they’ve created offsets because they were going to build a dirtier one.

Bryan Leyland, chairman of the economic panel of the New Zealand Climate Science Coalition, said, “I first heard about carbon trading at a conference more than 10 years ago. I got up and said ‘If I was the financial adviser to the Mafia, I would advise them to get into carbon trading.’ Nothing that has happened since then changes my opinion - rather the reverse.”

In fact, the Italian mafia is getting involved in green energy.

And let’s not forget Enron’s Ken Lay was a strong supporter of carbon cap and trade. He believed a cap and trade program would “do more to promote Enron’s business than almost any other regulatory initiative.” These carbon allowances that will be bought and sold have a value estimated at $50 billion to $300 billion annually, and the trade in them would be a huge new business. Enron may be gone, but others ready to take advantage of cap and trade—at the public’s expense—are not.

>> Visit Heritage's Rapid Response page for a collection of the latest research and policy resources on cap and trade.

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