From DON SANDERSON
May 29, 2009 Ukiah, Mendocino County, North California
A View From Afar
Here I sit in outer space, occasionally intercepting so-called information broadcast by dying print media and internet blogs of unknown origins. Some are reporting that the recession will be over in a couple of months, but jobs and house prices will continue shrinking until sometime next year. Anyhow, though individual debt is at al all time high, consumer confidence is increasing – but, wait, their purchasing isn’t. A lot of this just doesn’t compute, but there is more.
The really big news that isn’t headlined by the popular media is that the Waxman-Markey energy and climate bill is on the House floor. As with all such legislation, as far as I can tell from discussions, it is likely so convoluted that no one truly understands it. “Plenty of folks are horrified—for entirely opposite reasons.” Keith Johnson wrote in the Wall Street Journal, “Even with all the compromises, conservatives are still aghast at the costs of what they call a giant ‘energy tax.’
Thanks to all the compromises, some environmentalists are aghast at what they see as a toothless bill. You could drive yourself insane plowing through the nearly 1,000 pages and try to work out how all the overlapping policies, regulators, giveaways, exemptions, and mandates actually affect U.S. greenhouse-gas emissions over the next four decades.”
Not to worry. The White House assures us, in a statement released May 22, 2009, “Coupled with the announcement about setting a new national policy to both increase fuel economy and reduce greenhouse gas pollution, the legislation that passed out of House Energy and Commerce Committee is a historic leap towards providing clean energy incentives that will reduce our dependence on foreign oil and create millions of new jobs all across America. The President has been clear that if there are disparate impacts on consumers and business during the transition period, they should be compensated. Make no mistake – this bill sets aggressive emissions reductions targets and provides for a program that invests in the technologies needed to bring about a clean energy future.”
Waxman-Markey projects that implementation of the bill will reduce carbon dioxide emissions 4 percent below 1996 figures by 2020. Geoscientists are projecting that emissions must be reduced in this period by at least 25 percent to arguably 40 percent to have a significant effect in alleviating global warming. Analysis by the Environmental Protection Agency shows that if the United States implemented a 60 percent reduction in CO2 emissions by 2050, the global temperature would be reduced by 0.1-0.2 degrees Celsius in “prevented: warming by 2095, which would be insignificant given the current and projected increases of between 6 and 11 degrees Celsius if we continue as we are.
Europe had sought a 30 percent reduction target for the U.S.. China says it wants developed nations to cut their greenhouse-gas emissions by at least 40 percent by 2020 from 1990 levels. It is also asking rich countries to donate at least 0.5 to 1 percent of annual gross domestic product to help poorer countries cope with climate change and greenhouse-gas emissions.
As reported by Jing Yang and Shai Oster in the Wall Street Journal, “India has also refused to accept any carbon caps, arguing like China that they would limit economic growth and unfairly penalize late-developing nations. Europe and the U.S. generated the bulk of the carbon gas already in the atmosphere, they argue, and should bear a greater burden of the cost to fix it.”
House Republicans have ineffectively been sniping, but the fun begins when it gets to the Senate Republicans and coal state Democrats get their teeth into it. Any guesses how many pages it will have when it reaches the conference committee? The coal industry is the killer. Surely oil is fading away, but world coal reserves are huge. If we are truly honest about the industrial world’s energy future, coal is the central player, nearly the only one. Much of American electrical generation depends upon coal. China also relies on coal as does Australia. The problem is that “clean coal” is nonsense.
The heart of Waxman-Markey bill is cap-and-trade, an idea promoted fifteen years ago by the Kyoto Accord, and often mentioned with approval by Mr. Obama. In rough terms, industries are restricted, capped, as to the amount of greenhouse gasses they may release – with one escape hatch. If someone has an idea for an anti-polluting industry, i.e. one that sequesters greenhouse gasses, the polluting industry can “purchase” the amount the clean industry removes from the atmosphere, which will allow the polluter to increase its emissions by that amount. The money so received will allow the clean industry to begin business, so it is selling something that it only promises to deliver sometime. Thus, someone may offer to plant a forest. The amount of carbon dioxide collected by the trees after they are planted and grown sufficiently large is the amount the green company has for sale. The collecting industry must be new; no one with an old forest need apply.
Lots of questions. Who sets the price? Is there bidding? Who verifies how much any industry is polluting and how much remediation a green industry may have to offer? Who then verifies that both are holding to their agreement? If the polluting industry increases its rate of pollution after a purchase and continues at this new rate indefinitely, the green industry likewise must meet its end of the bargain indefinitely. What if the green industry fails or otherwise doesn’t deliver? Companies that reduce emissions by investing in efficiency or renewable power can also sell permits to others. But, who will be checking? It appears there would be a gigantic bureaucratic overhead. Who pays for this?
Europe instituted cap-and-trade several years ago. According to the Wall Street Journal, European “emissions have risen instead of fallen (by 1 percent per year since 2005).” In fact, “European regulators note that the program just completed its pilot phase, but they acknowledge that changes are needed.” There have been regular reports of fraud and abuse.
Caps on industries will be set somewhat higher than their present pollution levels to give them time to adjust; after they have reached the cap, they must find carbon credits for sale, invest in pollution control equipment, or stop growing. Over time, their caps will be reduced.
In effect, as cap-and-trade was originally conceived, companies would be indirectly taxed for growth, ultimately to remain the same, which will require them to raise prices. Since energy companies will be the most impacted, prices will rise across the board. The EPA noted that “lower income households are disproportionately affected by a GHG (Green House Gas) cap-and-trade policy because they spend a higher fraction of their incomes on energy-intensive goods.” EPA estimated a 22 percent increase in electricity prices and gas prices over $4 per gallon by 2030 – we’re likely, it seems, to reach that $4 goal much sooner, as quickly as the price of oil is now rising.
Were the U.S. to impose caps like those recommended by China, Europe, and geoscientists, it would appear its economy would quickly shrivel and drag much of the world’s economy down with it. Mr. Obama is faced with a dilemma.
Mr. Obama’s 2010 budget assumed $78.7 billion in revenue in 2012 from auctioning off those emission credits to companies (and $645.7 billion by 2019), but according to the Wall Street Journal the Waxman-Markey bill will give away 85 percent of those permits until 2026. Budget director Peter Orszag said in March that if the permits weren’t auctioned “it would represent the largest corporate welfare program that has ever been enacted in the history of the United States.” “How one gives them away, what restrictions are on that gift, makes all the difference in the world for the economic effects,” Douglas Elmendorf, director of the Congressional Budget Office, reportedly counseled, which promises to make the bill all the more contorted and EPA’s task that much harder. Mr. Obama’s budget proposal projected more than $75 billion a year from the auction, much of which was supposed to go to his “making work pay” tax break. So, Waxman-Markey effectively adds $75 billion to the federal debt.
The U.S. is now acquiring a huge financial deficit, which it must fund by selling U.S. Treasury bonds. Fanny Mae and Freddy Mac are also running multiple billion dollar debts, which are being funded by bonds. China had been a big investor in both in long term bonds. It is now selling its Fanny Mae and Freddy Mac bonds and investing the money in short term Treasury bonds. It is also selling its long term Treasury bonds and otherwise investing the money.
Japan’s central bank, the second big investor, has also been rethink bond investment. For this and other reasons, the price of these bonds are falling and, hence, their yields of, i.e., interests earned are rising. The rising yields on these bonds affects interest rates throughout the economy, such as mortgage rates, and thus housing recovery. The Federal Reserve Bank is attempting to control interest rates by buying these bonds at higher prices – and lower yields. In order to do this, it is printing bundles of bogus dollars, the expenditure of which by the U.S. government also puts pressure on the value of the dollar, inflation, and compensating interest rates. The question many are asking is what happens when the Fed no longer buys bonds and everyone else decides to take their money elsewhere. Must I remind you again that the Fed is owned by a cartel of international bankers, some of the same ones the Fed and U.S. government bailed out. Sticky stuff there.
It appears is that the climate change bill that finally comes out of Congress will not reduce American greenhouse gas emissions and will greatly tempt many developing nations to not make an effort. Further, it will swell the federal debt, necessitating the sales of even more U.S. Treasury bonds. So, why bother?
If this were the end of the bad news, we should be sufficiently alarmed. While a handful of large banks may or may not be surviving, the FDIC reports many smaller ones are increasingly in danger; because their mortgage security reserves are shrinking away and they are afraid to make loans, their primary income from interest payments is disappearing – they’re going broke. In addition, General Motors will shortly go bankrupt, which seems likely will cascade company failures and unemployment throughout the country and world. California has no budget and none is expected in the near future. A California bankruptcy is much worse than that of General Motors and I doubt Mr. Obama will permit it. But, any salvation will increase the federal debt even higher. The recession is in no sense over nor can an end even be projected.
Geoscientists have means to investigate how the Earth’s atmosphere and temperature has behaved over tens of millions of years. Other than during the Paleocene-Eocene Thermal Maximum fifty five million years ago, when temperatures reached heights similar that which is being predicted for our time, the Earth’s temperature has varied little for almost all of this time with maximum temperatures somewhat lower than those current. This was true even though the sun has been constantly warming. Then, a bit over fifteen million years ago, an ice age occurred. This was followed by a shorter interglacial, i.e. warmer, period that was warmer than that of previous ages. Since that time, the Earth has been subject to a series of ice ages with warm separations.
James Lovelock, the originator of the Gaia hypothesis, has proposed a metaphor: When a top is spun, it initially repeatedly rotates in the same spot even though it is slowing down. Then, it begins to wobble. Lovelock surmises that as the sun has continued to warm, the chemical/biological processes that maintained even Earth temperatures have become erratic; in effect, they are wobbling. How long can this continue?
During prior interglacial periods, atmospheric carbon dioxide reached levels of about 280 parts per million. This was also the level of the current period before the beginning of the industrial age. In 2005, the level exploded to 379 parts per million; it has now nearly topped 390 and is rising steeply. Some scientists are calculating that anything above 350 parts per million is beyond the tipping point. Some conjecture that the Earth began moving toward the next ice age right on time in the fifteenth century, but the trend was interrupted beginning in the mid-eighteenth century with the arrival of the industrial age.
We are well on our way to burning up, beginning with drying up. Given that the United States government can’t take the steps that must be made implies, to me, that our best hope is that U.S. Treasury bond sales fail, that this country’s economy and capitalism suffer a general collapse unrecoverably into deep depression, and that the government goes broke and falls into ineffectiveness. What are your odds? That will surely reduce greenhouse gas emissions. Of course, if the U.S, made the cuts others are demanding, a crash would likely occur as well.
Where am I wrong? Doubt me, but do the research. Given such prognoses, what, then, shall we do?
See also Global Warming Already Causes 300,000 Deaths a Year, Says Kofi Annan Thinktank
Climate change is greatest humanitarian challenge facing the world as heatwaves, floods and forest fires become more severe. Global Warming is already responsible for 300,000 deaths a year and is affecting 300 million people, according to the first comprehensive study of the human impact of global warming.