Greenscam: Cap & Trade

A review of climate science, economics, and public policy: thoughts from EPA lawyers opposed to Cap & Trade proposals.

Courtesy: universetoday.com

(EUGENE, Ore.) - Climate change is a big issue for government at the State, Federal, and International levels. Climate change is a difficult issue because there is broad disagreement as to whether or not it is real, what causes it, and who should pay for mitigating actions.

The Oregon Senate, in SB 80, proposed implementing a Cap & Trade program to reduce greenhouse gas (GHG) emissions in Oregon. The Federal government is currently considering similar legislation. Now, two EPA lawyers, Allan Zabel and Laurie Williams have released a video criticizing the proposed Federal legislation.

I will give a brief review of the science and economics of climate change, and share the arguments of these EPA lawyers.

The Science of Climate Change

Climate science is complex. I am not a climate scientist, so my perspective on it is limited to what I do know, and what is printed by climate scientists. What is crucial here is the concept of uncertainty.

Science does not deal in the black and white / true and false declarations made by pundits and policy makers. The scientific uncertainty about the climate arises because the earth's climate is a very large, complex, and dynamic system. Trying to take this system and put it into a linear model relies on making assumptions about cause and effect that cannot be proven.

For example: global average temperature is an estimate based on sampling and modeling. Temperature is recorded at thousands of points around the world, and these samples are put into a computer model that gives an estimate of global average temperature over a fixed time period based on these samples. Because it is impossible to say for sure how heat is distributed around the globe, there is a certain level of uncertainty with this model. Uncertainty does not mean that the estimate is wrong.

The estimate provided by scientists is certainly better than the guess of the person on the street, but it is still only an estimate.

The Earth's Magnetic Field: Gary A. Glatzmaier UCSC

Understanding changes in temperature poses more problems, because it relies on hypotheses on many levels about what factors affect temperature. Changes in the amounts and types of solar radiation, changes in cloud cover, changes in atmospheric composition, and other environmental changes such as how energy is either absorbed or reflected by land, water, and ice mass all potentially play a roll in temperature.

The subject of greenhouse gas concentrations, and their effect on temperatures is itself a subject of uncertainty. CO2 is the GHG where the largest changes in concentration have occurred, but other gases are hypothesized to trap heat to a far greater degree than CO2. Another area where uncertainty exists is with solar radiation, which is the energy source that heats the earth. Solar radiation occurs in a broad spectrum, and both the intensity and composition of the solar radiation reaching earth is continually fluctuating.

Another factor is the earth's magnetic field, which repulses certain types of solar radiation. The earth's magnetic field fluctuates over time, thus changing the amounts and types of solar radiation entering the atmosphere.

Climate scientists create models that reflect their best understanding of these many various factors, and then estimate the way that particular changes in one or more variables, such as GHG concentrations, will affect temperature. These estimates are subject to an unknown degree of uncertainty, but it is probably high. Scientific uncertainty is not a reason to do nothing. The scientific estimate, based on research and analysis, is certainly better than the guess of a person off the street. However, it is still an estimate.

In order to put things in perspective, consider the accuracy of the local weather forecast for any given small area for a period a week in the future. You probably see the weather forecast on the news every day, or at least a few times a week. The accuracy of these forecasts may be better than a random guess, but it is not super precise.

Now, imagine doing a forecast of the weather for the entire earth for the next several decades. If you increase the number of unknowns, increase the area of the prediction, and increase the time span of the prediction, do you expect it to be more or less accurate?

Experience vs. Predictive Modeling

Predictive modeling is uncertain. That is acknowledged by all scientists. The degree of uncertainty is subject to scientific disagreement, because it cannot be precisely proven. However, experience does show that the climate is subject to change. Winters may be more or less harsh, rainfall varies, summers may be inordinately warm, and so on. Even if you dismiss predictive modeling, you are still faced with the exact same possibility of future climate change, except that you have no idea whatsoever what form that climate change may take.

Arguing that climate change predictions are wrong in no way changes the fact that the climate is subject to unpredictable change. Sound public policy should always take into account the possibility of climate change, particularly as it relates to food production. Climate change results in crop loss and famine on a regular basis, and has throughout recorded history. Regardless of the extent to which human activity contributes to climate change, climate change is always a possibility, and prudent measures to adapt to climate change should be a routine part of public policy.

The Economics of Climate Change

The current debate regarding the environment and climate change has been horribly polluted by the financial interests at stake. Government, academia, and media all operate on a pay-to-play basis. As a result, issues with the greatest financial interests at stake gain unwarranted exposure, and the debate is often skewed by the financial interests of the participants. Paid advocacy has the power to both drown out honest opinion, and to muddy the waters, making it impossible for observers to discern between honest opinion and paid advocacy.

Exxon, for instance, paid millions of dollars for decades to fund sham institutes that denied the conclusions of climate scientists and circulated claims that climate scientists are part of a conspiracy to destroy American. Tom Coburn has promoted these claims on the Senate floor.

The climate change conspiracy theory is a rehash of the “global communist conspiracy,” which has now morphed into a global banker/Jew conspiracy depending on who you talk to. These claims go back to Tsarist and Nazi propaganda, which asserted that communism was part of Jewish conspiracy for world domination. With the collapse of communism, these theories have now come full circle. All of these conspiracy theories are typical Monarchist/Fascist propaganda, which claim that the rich and powerful are really the allies of the people against the imagined enemies who are working to destroy them.

The reason that climate change is the subject of all of this propaganda is that the amounts of money at stake are enormous. Coal and oil are the foundations of the industrial economy. Nothing is manufactured without coal and oil. Nothing is grown without coal and oil. Nobody travels more than walking distance without coal and oil.

Modern life in an industrial society is completely dependent on extraction and consumption of coal and oil.

Reducing energy consumption implies a reduction in industrial production and consumption of industrially produced goods. It also implies a shift in power within society away from individuals and groups whose wealth and power are based on monopolization and extraction of energy resources. Individuals and groups whose wealth, power, and prestige are based on industrial production are naturally opposed to relinquishing their elevated positions. The mass of the population that is dependent on industrial production for survival is easily convinced that any reduction in production is contrary to their interests.

What is crucial to point out here is that mass consumption of energy resources has a fixed limit. Coal and oil are not produced, they are extracted and consumed. Once the fixed stock of coal and oil is gone, it is gone, and everything built on it is gone with it. For the past century, industry has acted like a bunch of drunken sailors, who have mutinied, thrown the captain overboard, and gotten heavily into the rum rations. The ship has been left to drift. Now, the rum is running out, and a few of the more rational voices are encouraging these drunks to sober up before it is all gone, and get back to the business of sailing the ship. In any case, the rum will run out. The question is whether or not the ship sinks before it does. The only difference between this analogy and real life is that a ship can sail without rum. Industrial society will sink without coal and oil.

Courtesy: library.thinkquest.org

Industrial society is not essential to humanity. Humans existed long before it, and will exist long after it. What is at stake here is stability and quality of life. In particular, industrial societies would like to maintain their positions of power in the world, which are based on monopolization of energy resources, and the war making capacity that comes with that. Within a society such as the United States, the surplus of consumer goods that can be created using industrial production has facilitated the maintenance of a hierarchical society with stratification based on wealth derived from industrial production. Those at the top of this hierarchy enjoy their positions of privilege and would like to maintain them. A smooth transition from industrial society based on extraction of coal and oil to some other basis would be in their interests because it would keep the social hierarchy intact.

Courtesy: fhsu.edu

Much of the debate about climate change policy has nothing to do with climate change or the environment and everything to do with managing declining energy stocks. The connection between climate change and greenhouse gasses produced from burning coal and oil provides an opening for parties interested in managing energy consumption to promote policies with that in mind.

It is true that much of the advocacy on climate change policy is disingenuous, but that does not mean that the intention is not worthy. The public has consistently rejected all attempts to convince them to exercise restraint in energy consumption. Even today, most of the discussion in opposition to legislation on climate change centers around the fantasy notion that current levels of consumption can be maintained.

People act as though it is their right to consume stocks of coal and oil. Did they create the coal and oil? Do they have any more right to consume it than anyone else? If so, where is this right derived from?

People complain about cutting their standard of living, but what of future generations? In one century roughly half of the stock of oil on earth has been consumed. It is an interesting proposition that this one particular group of humans in all history has a unique right to consume such a large proportion of a fixed resource.

Of course, no such right exists. The people who promote this gross irresponsibility and disregard for humanity and the environment are wrong. Humans do have a responsibility to maintain the environment, and to insure that adequate resources exist to provide for future generations. The rule of responsible stewardship is that you consume no more than can be regenerated. When it comes to coal and oil, the assumption is that regeneration is very slow, or may not occur at all, and responsible consumption must reflect this.

Cutting Greenhouse Gas Emissions: Cap & Trade

“Cap & Trade” is the broad term for a policy that would impose taxes on CO2 emissions. These taxes are in essence a tax on energy consumption. They would force decreased energy consumption, which would ripple throughout the entire economy as a reduction in industrial production.

Under these schemes, existing industrial producers would be given credits for their CO2 emissions. The “Trade” aspect of Cap & Trade would allow these producers to buy and sell those credits. An additional aspect of Cap & Trade is that “offsets” for carbon emissions could also be bought and sold. Offsets would include things like forests that absorb carbon dioxide from the atmosphere.

Cap & Trade has been proposed in Oregon as Senate Bill 80. The Federal Government is currently proposing similar legislation.

EPA Lawyers Argue Against Cap & Trade

The Huge Mistake - Climate Change Solutions 2009

Allan Zabel and Laurie Williams are two career lawyers working for the EPA. They have released a video on the internet criticizing Cap & Trade proposals. Thank you to Democracy Now for drawing attention to this story.

“Climate change cannot be fixed by tweaks to existing facilities... It requires an energy revolution.”

“Energy from the uncontrolled use of fossil fuels is cheap, and clean energy remains expensive.”

“Cap & Trade for climate change has been tried in Europe. It produced harmful volatility in energy prices and few greenhouse gas reductions. It raised energy prices for consumers and made billions in windfall profits for utilities.”

“Congress's climate plan would allow all required greenhouse gas reductions for almost twenty years to be met with carbon offsets from the U.S. and abroad.”

“In my work at EPA I have been overseeing California's cap & trade and offset programs for more than twenty years. My unique and extensive experience has convinced me that carbon offsets won't work. They can't be certified or verified as real additional reductions. Since the most flawed offsets are generally cheapest they will be most in demand. These flawed offsets will make it look like we are getting greenhouse gas reductions when we are just getting business as usual.”

“Like the sub-prime mortgages and other creative financial instruments that helped bring us the current recessions, carbon offsets lack integrity. They make easy profits for offset investors while increasing the risk of climate disaster for all of us. That is the big rip off.”

Other Economic Flaws with Cap & Trade

Another huge flaw in Cap & Trade legislation, which Zabal and Williams do not address, is the issue of carbon credits. Because existing producers are given credits for free, this cements their monopoly position. It actually increases the competitive disadvantage for new more efficient producers because new producers have to pay for emission allowances, while existing producers get them for free. If a new producer wants to invest in technology that will reduce consumption of fossil fuels, the cost of paying for emissions allowances may be greater than the additional profits that could come from more efficient production. The effect of this will be that only existing producers can profitably deploy more efficient technology, and consequently, they will be able to maintain their monopoly positions, regardless of whatever technological innovation takes place.

The other major problem with Cap & Trade is the issue of trading emission allowances on an open market. This creates a new avenue for financial speculation, and opens up all industry to even greater control by speculative capital. Financial speculators do not make money off of production. They make money by gambling on market fluctuations. Since the easiest may to predict market fluctuations is to create them, financial markets have always been plagued by problems of rigging, collusion, false reporting, and insider dealing. To the extent that productive business relies on markets, fraud by financial speculators interrupts productive business activity, and the fact that people are making money engaged in speculation means that they aren't engaged in productive activity. As a society, we need to eliminate financial speculation to whatever extent possible, not create new ways for speculators to make profits.

Conclusion

Cap & Trade legislation is a good example of how a valid idea, such as compelling reductions in the consumption of fossil fuels, can be hopelessly twisted once it is exposed to the legislative process. The intentions behind taking mitigating action on climate change are good, but the policies that business and financial interests are trying to sell under that banner would be disastrous.

As a society, we do need to reduce consumption of fossil fuels. The only choices that people have are to voluntarily reduce consumption in an orderly way, or to face forced reduction through crisis at a later date. Denial and blame are not options, they are a choice of crisis.

As individuals and businesses, you do not need to rely on government to make wise decisions regarding energy policy. The house you live in, the car you drive, where you buy your food, who you work for, and what you invest your time and money in are your own choices. If you make these choices wisely, with an eye toward saving energy, consuming products that are less reliant on fossil fuels, and investing in production that is less reliant on fossil fuels, then you will be prepared for the inevitable decline in fossil fuel based production that must come. In the meantime, you will save money, become more self reliant, and increase yours and your family's security.

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Salem-News.com Business/Economy Reporter Ersun Warncke is a native Oregonian. He has a degree in Economics from Portland State University and studied Law at University of Oregon. At a young age, his career spans a wide variety of fields, from fast food, to union labor, to computer programming. He has published works concerning economics, business, government, and media on blogs for several years. He currently works as an independent software designer specializing in web based applications, open source software, and peer-to-peer (P2P) applications.

Ersun describes his writing as being "in the language of the boardroom from the perspective of the shop floor." He adds that "he has no education in journalism other than reading Hunter S. Thompson." But along with life comes the real experience that indeed creates quality writers. Right now, every detail that can help the general public get ahead in life financially, is of paramount importance.

You can write to Ersun at: warncke@comcast.net