---------------------------------------------------------------------------------------------------------------------------------------------- 

ON CAP & TRADE - WHAT IS IT?

-- ALLEN HEMPHILL

Cap and trade.

I am tempted to say that it is like the wealthy in the Civil War, who hired poor people to serve for them – but that is far too simplistic.

Actually, it is purposely complicated, and the longer it runs the more complicated it becomes.

Here is what you really need to know: It will cost you money.

That is it will cost you money unless you believe that corporations will decrease their profit to pay for the increased cost of doing business.

Here is how it works: Energy producers bring fossil fuel into the United States in a tanker. Scientists can estimate how much CO2 (or the equivalent, CO2e) that x number of barrels the fuel will produce.

Based on how many barrels the fuel producer has in hand, a permit is issued for so many tons of CO2 or the equivalent CO2e.

Now some companies will find that they can change fuels, or use wind energy, or solar, and will have permits in excess because they now produce less CO2e, and they can sell those excess permits to the first company.

So now the first company can continue to pollute (assuming you believe CO2 is a pollutant), but since it had to buy the excess permit capacity from the second company it continues to pollute at a higher price.

The assumption is that in order to save the permit money, the company will do what the second company did and try to find fuel that has lower CO2e.

Of course there is more cost – the cost of monitoring and trading, all of which the company has the choice of eating or passing on to the customer. (Guess which one they will select.)

Now, suppose you own a furniture manufacturing company in North Carolina, and suddenly your fuel costs go up 10%, or 20%. You are holding on by your fingernails, with high labor costs, high land costs, high…
And you get a slick brochure from India, offering to build your furniture, to your specifications for 30% less than your total costs. Shyam Saran, India's top negotiator at the UN climate conference currently underway has said his country will not limit their emissions.

So, you now have customers who can buy the same furniture at the same price but made in India (or China), or pay more for the furniture made in North Carolina.

That is the tradeoff. Pay more, or send the jobs overseas,

Since you are not going to move overseas, and you are going to drive your 6 year old car, you are going to pay more at the pump.

We don’t know how much because the House bill is not going to be the final bill, but the current bill has a lot of “Christmas Tree” provisions added, including the requirement to have a government inspector “grade” your home before you can sell it. They plan to grade it on the energy rating of appliances, the windows, the insulation, the heating and cooling and you must upgrade your home past some undisclosed level before you can sell it.

While I doubt that the Senate will let that get past it, with that one concept you have the idea behind all of this “energy” bill.

That is control of your life.

You have seen the idea floated in California or taxing you on the number of miles you drive, based on GPS information. You have seen the concept of the industry having control of your thermostat, and it will not take anything on your part to have that power transferred to the State when they determine that you use “too much” heating and cooling. In the area of water, we are under severe water restrictions – but no government agency is looking for new sources of water, they just want to ration that which is available, and it is a judge who determines how much is available.

The purpose of Cap and Trade is to make current fossil fuel more expensive so that other really expensive alternatives can compete. Solar works well, one house at a time but the Return on Investment exceeds my lifespan. Wind works sometimes. Nuclear is not in the plan.

Fossil fuel is here today, and will be here tomorrow and a lot of tomorrows. It will simply be more expensive.

A lot more expensive. This plan was initially called a “Carbon Tax” – and that is what it is, but the word “tax” was off-putting, so they settled for “Cap and Trade.”

It is a TAX.