Climate change legislation: what's so bad about it?

Because it costs green to go green.

 

$$$$$

If it didn't cost anything, it would be a no brainer.

 

spending money to go green = BAD
spending money for healthcare = BAD

spending money for useless war = GOOD

 

This is a interesting topic to me.(not AGW, but the politics) Much like many social issues, it turns political and sides are drawn. From there, we tend to change and/or adopt out viewpoints of whichever side we support.

Both sides are equally guilty of pollution and both sides should take this topic serious. Unfortunately, politicians step in and lead everyone in a completely different direction. For example, cap and trade does nothing to help the environment, but pits Americans against each other.

How often do we see politicians campaigning for/against AGW, but yet they never encourage Americans to do their part at home and work. Their solution is to regulate and tax. I know individuals who refuse to recycle because they feel its a liberal hippie thing. If AGW is real, there is no amount of tax or further regulation that will stop it. I think the key is to encourage each person do to their own part to reduce their own footprint. Unfortunately, personal accountability is not an American virtue. Its always someone elses fault.

 

well, when a presidential candidate suggested that people keep their tires properly inflated, one group made fun of him

 

Umm, yeah they are kind of elected in order to do that, hence the term "lawmakers"

Did you graduate high school? Serious question.

 

Yes, but it also costs green to subsidize the societal costs of the status quo.

 

Obama has not received enough praise for approving the expansion of nuclear energy -- the startup of 10 or so plants -- even though it will be years before they come on-line. On the other hand, I condemn his support of cap and trade because C&T will have a minimal effect on the environment / climate (according to quite a few scientists) whlle crippling our economy. C&T will not be imposed on any other country (notably China, India and Indonesia) so it will be ineffectual at best here. However, the negative effect on our economy will be devastating.

I am a strong supporter and user of solar and wind energy as well as other forms of energy generation such as hydro-electric, geothermal, hydrogen and clean coal. I'm also a champion of drilling extensively to provide proximate oil supplies until we can convert to other forms -- preferably with a fixed cutoff (2020?) of gasoline-powered vehicles.

Government needs to set the rules (and referee) but should be strictly prohibited from playing the game.

 

The Cap and Trade legislation would considerably raise the price of energy. It would also drive some energy producers out of business.

 

I agree with this statement!

 

Really? Seriously, I'd like to see that sourced. I can see some energy producers having reduced profit margins, or incentives to put more into R&D, but I can't see them driven out of business at all.

And I too like the move to nuclear! Very much so. Especially with recent advances in fusion research.

 

It all depends on how integrated the companies are. When oil was $150 a barrel and gas was $4 a gallon all major US petrochemical companies were losing money on there finished products like gasoline and diesel. The companies that actually drilled for oil were making money on the exploration side but losing money on refining the products with a net gain. With oil at $150 a barrel, gas would have needed to be around $6 dollars a gallon to make a profit on it. Companies that only refine products were losing money and still are. The prices for oil and refined products is not set by the companies but instead by traders who buy and sell futures. If the increases from cap and trade can be passed on to the consumer then they will, if not then some companies may go out of business or move their operations to other parts of the world where they can avoid this. Companies can't operate forever without a profit and rather than spend billions here in the US to make their operations comply they will spend it in other countries to build new facilities.

Also whenever the government sets a mandate such as lowering sulfur in products, it causes the companies to make capital investments because it takes more processing to remove more sulfur. When the sulfur specs for diesel were lowered to the new Ultra Low Sulfur spec, it caused the price of diesel fuel to increase above the price of gasoline. Sulfur is removed from hydrocarbons through a process known as hydrotreating. The more hydrotreating needed for a product then the more it cost to make. Hydrotreating is very expensive.

At the very least, cap and trade will cause the price of energy to skyrocket. If companies can't pass this on to the consumers then the will shut down or move to another country. If it is passed on to consumers we will be paying outrageous prices for the product. This will cause inflation because it will cost more to make any product that takes energy to make.

 

link

The Effects of Cap and Trade on Business
Despite the promised environmental benefits of the proposed Cap & Trade legislation, there's no denying it will inhibit business growth.

What is Cap and Trade?

The American Clean Energy And Security Act of 2009, more commonly known as “Cap and Trade,“ passed the House of Representatives on June 26th on a largely party-line vote. The Senate is currently working on a similar version of the bill, and President Obama has stated publicly that he hopes to sign Cap and Trade into law this year. Although many Senators from both parties are under mounting pressure from energy companies, businesses and consumers to oppose such legislation, the seating of Sen. Al Franken in the chamber provided Democrats with a filibuster-proof majority. This makes it likely that the legislation will at eventually make it to the floor for a vote, perhaps as early as this fall.

Cap and Trade involves utilizing legislation and regulation to curb the release of pollutants and greenhouse gas emissions, specifically carbon dioxide. If enacted, the legislation would set up a complex accounting and trading scheme whereby companies would buy and sell emission permits and/or credits. The goals of the bill are noble; after all, who is for pollution? But like anything in business, there is a cost-to-benefit ratio. The downside of Cap and Trade is that it is intended to move consumers off carbon-based fuels by increasing prices through higher taxes and strict regulation of growth.

Using taxes to disincentivize some practices and offering tax breaks to incentivize others is nothing new. Common examples are sumptuary or "sin" taxes on alcohol and tobacco and tax write-offs for energy star appliances and charitable giving. Still, Cap and Trade goes far beyond anything currently on the books.

How Does Cap and Trade Work?

The House version of Cap and Trade would force companies to reduce their carbon emissions by 17% by 2020, and 83% by 2050, when benchmarked against 2005 levels. To facilitate this reduction, federal agencies would cap the amount of carbon (and other pollutants) that companies can release into the environment, based on the averages in their particular industries. In a way it’s similar to the varying salary caps used by the NFL, NBA and NHL to level the playing field. In sports, the franchises that maintain space beneath the cap are more flexible with regards to making strategic changes involving personnel. Under Cap and Trade, businesses that stay under the cap will be better positioned to make strategic changes involving operations and growth.

Companies will be required to decrease emissions by a certain percent each year against the benchmarked average, or “Cap.” Companies that don’t make operational changes that result in emission reductions will be penalized and will have to purchase offsets from companies that have exceeded their reduction requirements. That’s where the “Trade” part comes in. Reductions in carbon emission will become an asset and commodity that is traded between companies and is taxed by the government.

How Will Cap and Trade Affect Business?

Despite the spin emanating from politicians and special interest groups, this new regulatory scheme is a thinly-veiled tax on business that would hit manufacturers and distributors particularly hard. Imagine that ten years from now, your top competitor is brought down by unsustainable debt. As a result, they’ve put most of their assets on the market, assets that would allow your company to absorb a decent percentage of their market share in a short period of time.

Under Cap and Trade, you would have to offset the increase in emissions that would result from the expansion in operations and distribution. Even if it was legal for your company to increase emissions by such an exorbitant amount in one year, it would certainly be prohibitive to business have to pay for the assets as well as the offsets. One solution might be to spread your incorporation of the ailing company’s assets across several years, but that does little more than create an accounting scheme that would slow business growth. And depending on the final markup of the bill, there may be limits on what percentage of carbon reductions can be made up by purchased offsets (versus organizational reductions) each year, thereby limiting corporate growth to a predictable percentage of existing operations.

How Would Cap and Trade Affect the Economy?

Another damaging aspect of Cap and Trade is that the emission reductions required per year are not rooted in reality. During the first few years of regulation, most firms will find it easy to reduce their carbon output. There are many strategies and programs out there today that will achieve the necessary results with minimal up-front investment. But the fact remains that around 85% of our energy use today is based on carbon-emitting fossil fuels. The ability to switch to alternative energy sources in the short term is both limited and expensive. Despite the ability for companies to continue improving their operations, they will still be required to get under the cap or pay the price. This will happen every year, whether there are technological breakthroughs in clean energy production or not.

Once the regulations outpace the available solutions, there will be less carbon to trade. As the price for this commodity increases, many companies will go out of business. Since the healthy companies won’t be able to afford to take on the emissions associated with expansion, many of them won’t buy out their former competitors. The increased prices resulting from the higher cost of doing business will be passed on to customers, who will already be paying higher prices for goods and energy. The economic cost that may result from this attempt to micromanage industrial growth is projected to be in the trillions of dollars of lost GDP.

Proponents of Cap and Trade argue that the legislation will be amended as needed to protect our economy. While we can be hopeful that they are right, the important question is whether the damage will have been done by then. Opponents argue that the sheer number of pollution allowances being promised to energy producers in exchange for their Senators' support for the bill will negate the goal of the legislation, making it all cost and no benefit to American taxpayers. They also argue that the inflexibility of Cap and Trade legislation and the stymieing effect it will have on our economy will inevitably lead to nationalistic “Buy American” clauses that will only exacerbate the problem. In fact, we’ve seen calls for such provisions already. And we won’t even get into the dangers of patronage, graft and fraud that would be endemic in such a restrictive economic environment.

Is Carbon Regulation Inevitable?

This scenario we’ve described above is purely theoretical and based on the premise that the Senate will pass Cap and Trade. There's no guarantee that such sweeping new regulations will be adopted this year or during this administration.

What we do know is that Europe has already adopted a complex carbon trading scheme, and it seems inevitable that America will eventually adopt some form of regulatory oversight. As European companies seek to impose the same barriers to profitability on their American counterparts, we'll likely see this issue start to dominate at various world trade forums. In fact, European diplomats are already advising American officials on the successes and failures they’ve experienced on the continent. So the question seems to be whether carbon regulation will happen sooner, rather than later, and what that program will look like when it is signed into law.

Of course, Cap and Trade may turn out to be only a minor thorn in the side of American industry, but no one would make an honest argument that it will be financially beneficial to anyone besides carbon accountants and the federal treasury. To put it simply, there’s an upside to Cap and Trade, but it’s dwarfed by the unavoidable downside.

Where Can I Find More Information?

Because Cap and Trade is a politically-charged issue, we would like to offer the following resources that approach the issue from varying perspectives:

* Environmental Defense Fund: How Cap and Trade Works

* Wall Street journal: Who Pays for Cap and Trade?

* Center for American Progress: Cap and Trade 101

* The Heritage Foundation: Beware of Cap and Trade Climate Bills

 

cml750, thanks much for your detailed reply and the linked article. I love learning things. I don't accept it 100% in this case, but definitely more than 50% of the discussion in your post and the article make sense to me. Where I might differ would be estimating the magnitude of the effect.

Much like people who question AGW like to question the "catastrophic" predicted consequences, I would question how we get to notions like "skyrocketing," etc, for Cap & Trade. I can definitely see more costs to consumers, but I'll have to do more reading to see if the dire predictions have merit.

 

I work in the industry so I get to see how things like this affect the industry. I work for a global company that made a 2 billion dollar investment in our facility in 2007. The decision for this investment came down to our facility and two others in other countries. Our facility was chosen based on our productivity record, our superior environmental performance, and our superior safety record. This investment has created thousands of construction jobs and will create around 100 permanent jobs when it is completed in 2011. After this legislation passed the house, I heared that the company was privately regretting their decision to make this investment in the US because they will not get enough return on the investment if it ever gets passed.

I believe we all have a responsibility to protect the environment and companies do need government oversight to make sure the comply but it can go too far.

 

Killing jobs and raising electric bills during a major recession: what's so bad about it?

 

I also wanted to say that Europe already has a system like this in place. Last year I had to go to France for some training. Everyone in France drives a very small high gas mileage car. When I left the the US our gas prices were about $2.05 a gallon. The first gas price I saw in Europe was (1.45) and I was thinking wow it's actually cheaper over here. After further investigation it was (1.45) per liter. It takes 3.79 liters to make a US gallon. So at (1.45) per liter that figures to almost $5.50 a gallon. I then realized it was even worse than that because it was (1.45) Euros. The exchange rate at the time was it took about $1.35 to buy (1.00) Euros, so 5.50 x 1.35 equals almost $7.50 US dollars for a gallon of gas in Europe. Does anyone want to pay these kinds of prices for gas?