This is the first of three videos I’m highlighting from recent interviews with politicians who would be excellent candidates for the Energy Party, talking about our No. 1 issue.
This interview was largely, but not entirely, the basis for my column of Feb. 25.
Best line:
"The French — 80 percent of the power needs of France are met by the nuclear power industry. They are the model. I never thought I’d hear myself say this. They are the model; we should follow the French when it comes to nuclear power."
Related Posts
Cap and Charade
The political and business self-interest behind carbon limits.
Saturday, March 3, 2007 12:01 a.m.
The idea of a cap-and-trade system for limiting carbon-dioxide emissions in the U.S. has become all the rage. Earlier this year, 10 big American companies formed the Climate Action Partnership to lobby for government action on climate change. And this week the private-equity consortium that is bidding to take over Texas utility TXU announced that, as part of the buyout, it would join the forces lobbying for a cap on carbon emissions.
But this is not, as Lenin once said, a case of capitalists selling the rope to hang themselves with. In most cases, it is good old-fashioned rent-seeking with a climate-change patina.
Start with the name. Most of those pushing this idea want you to think about it as cap-and-trade with emphasis on the trading part. Senator Barbara Boxer touts all the jobs that would be created for people trying to game the system–er, save the planet. And her colleague Jeff Bingaman calls cap-and-trade “market based,” because, you know, people would trade stuff.
But for that to happen, the government would first have to put a cap on CO2 emissions, either for certain industries or even the economy as a whole. At the same time, it would allocate quotas for CO2 emissions, either based on current emissions, or on energy output, or some other standard. If a company then “over-complied,” which means it produced less carbon dioxide than it was allowed to under the rules, it could sell the excess allowance to someone else. That someone else would buy the right to produce CO2 if doing so cost less than actually reducing emissions.
In this way, emissions would be reduced in an relatively efficient way: Those for whom reductions were cheap or easy would reduce, and if they reduced enough, they could sell their excess allowance to someone for whom the reductions were harder or more expensive. This kind of trading works, and we’ve argued in these columns that cap-and-trade beats the pants off just plain capping by lowering the overall economic burden of a cap.
The difficulties don’t lie with the trading, but with the cap, which is where the companies lobbying for restrictions come in. James Rogers, CEO of Duke Energy, put it plainly earlier this year: “If you’re not at the table when these negotiations are going on, you’re going to be on the menu.” Translation: If a cap is coming, better to design it in a way that you profit from it, instead of being killed by it.
Which is why the emphasis really should be cap-and-trade. It’s all about the cap, because without it there’s no trading. We don’t buy our daily ration of oxygen because it’s in abundant supply. Same with carbon dioxide–there’s no constraint on your ability to produce CO2 until the government creates one. When it does, it creates an artificial scarcity. What Duke, Entergy, TXU, BP, Dupont and all the rest want is to make sure that when the right to produce CO2 becomes limited, they’re the ones that end up owning the allowances. Because that would mean they could sell them, and make money off something that previously wasn’t worth a dime.
Thus, Entergy, a utility that relies heavily on natural gas and nuclear power and thus produces relatively less CO2, would love a cap that distributes the allowances based on how much electricity you churn out, rather than on how much CO2 you produce. Entergy’s “carbon footprint” is small compared to some other utilities, so an electrical-output-based cap would be windfall city. Dupont, meanwhile, wants credit for reductions already made because it sees instant profit in costs already paid. It also wants a cap to cover as many industries as possible so it can make money selling emissions-reduction products.
We don’t begrudge anyone the opportunity to make a buck. But there’s a difference between making money by producing things people want and making money by gaming the regulatory process. There’s no market here unless the government creates one, and who has the profit opportunity depends entirely on who the government picks as the winners and the losers in designing this market in the first place. So it’s no wonder that almost any business that has ever put an ounce of CO2 into the atmosphere is rushing to show its cap-and-trade bona fides……..
Gee, another scheme for existing businesses to deny entry into the marketplace, disguised as social altruism.
California is covered with oil fields, refineries, supertanker terminals… and their Senators and Congressmen vote to “protect” Louisiana, Alaska, Texas, Florida, South Carolina, etc from new oil and gas drilling.
And let’s not forget Sean Francois Kerree who is protecting Martha’s Vineyard from those icky tacky windmills. He follows the French model but not the one Brad referred to. I mean, can’t we just all agree to put that kind of ugly crap in Calhoun County somewhere so the hoity toity wont have to look at it.
What did Sen. Graham have to say about cap-and-trade? The video cuts off while he’s still explaining how it works, before we hear his opinion.
He’s for it. Sorry. I thought that was on there. I’m at home now, but I’ll see what else I have on that from notes tomorrow…
Cap-and-trade is the energy version of tobacco allotments.
On January 22, 2007, the U.S. Climate Action Partnership (USCAP) released a landmark series of principles and recommendations calling for the federal government to quickly enact strong national legislation to achieve significant reductions of greenhouse gas emissions.
The USCAP is an unprecedented alliance of leading non-governmental organizations and major corporations. This very diverse group of business and environmental leaders have come together to call for mandatory action, with a comprehensive approach involving near-, mid-, and long-term targets, and a range of effective policies.
Members of USCAP
Alcoa
BP America, Inc.
Caterpillar, Inc.
Duke Energy
DuPont
Environmental Defense
Florida Power & Light
General Electric
Lehman Brothers
Natural Resources Defense Council
Pew Center on Global Climate Change
PG&E Corporation
PNM Resources
World Resources Institute
Check out Energypolicytv.com, our new website that hosts video of key events in energy and the environment—sort of like a “CSPAN” for energy and the environment. Everything from Congressional hearings to conferences and talks on finance, movers and shakers in renewables, biofuels, oil, nuclear, climate change, the whole enchilada. Re comments above, you’ll see the whole meeting announcing the formation of USCAP. We’re bringing all the important stuff to the web to give the public access to it for the first time and accelerate the agenda for change. And we’ve made it free to users! Onward!
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