classical economics
for analysis,  forecasting
and policy design

Climate Change Morphs
CLIMATE CHANGE MORPHS INTO ENERGY TAX
Cap-and-Trade Lets Wall Street Set/Collect Carbon Tax

By Wayne Jett © July 9, 2009

    HR 2454, called the American Clean Energy and Security Act of 2009, no less, passed in the House by a margin of seven votes with eight votes provided by Republicans. The elite few whose influence really matters to government officials at the highest levels, traditionally called “mercantilists,” love to give their home party political protection by crafting a victory margin slightly less than the number of votes obtained from defectors of the opposing party. They did this in passing Smoot-Hawley in 1930 with a margin of two votes in the Senate, five of which came from Democrats. This little flourish allows their supporters to campaign for re-election by contending the bill passed with “bi-partisan” support.
    Leaving aside deceptive references in its title to “clean energy” and “security,” the House bill is usually called “cap-and-trade” legislation. Either name contributes nearly nothing to understanding of the bill’s contents, even among those who consider themselves astute in matters of business and government. At bottom, the bill would impose major increases in costs of energy. Since energy is a primary element of employment and prosperity, “cap-and-trade” essentially means a significantly smaller production model for the economy, many fewer jobs and lower living standards.
A Beginning Summary
     In a nutshell, HR 2454 centrally plans decisions on spending for energy by Americans throughout the indefinite future, requiring trillions of dollars to be spent in ways individuals would not otherwise choose. The bill:
(1)    revises combined efficiency and renewable energy standards for electrical utilities, tells states how incentives for renewable energy may be adopted, and raises the portion of federal energy purchases which are “renewable” from six percent in 2012 to 20 percent in 2020;
(2)    provides for creation of a “national plan” for “carbon capture and sequestration” involving wells for injection of carbon dioxide into the earth, for organization of a “Carbon Storage Research Corporation” with authority to assess utilities and others for its operating costs, for commercial deployment of related technology, and for performance standards at new coal-fired power plants;
(3)    requires all electric utilities to support infrastructure for plug-in electric vehicles, including heavy-duty vehicles, provides federal financial assistance for large-scale electrification of transport vehicles as alternative to gasoline-powered vehicles and for related infrastructure, provides federal financial assistance to auto manufacturers of electric-powered vehicles, authorizes issuance of emission allowances to manufacturers of electric-powered vehicles, and provides $50 billion in incentive loans to manufacturers of advanced technology vehicles;
(4)    declares use of oil as energy for transportation is a clear and present danger to the U. S., declares new cars sold in the U. S. should be capable of using alcohol as well as gasoline, authorizes mandates for sale of fuel-choice vehicles as portion of total sales by U. S. manufacturers, amends existing law requiring diesel emission reduction, provides loans for pipelines transporting renewable fuels, and provides emission credits for conversion of transportation fleets to alternative fuels;
(5)    provides for creation of State Energy and Environmental Development (SEED) accounts eligible for federal grants to each state for use in making loans, grants, other related purposes and administrative costs, with funds to be distributed  to states one-third pro rata, one-third by population and one-third by energy use, and details uses of funds by each state;
(6)    provides for federal financial support of Indian renewable energy and energy efficiency programs;
(7)    provides for assessment of Smart Grid energy transmission plan and all products making use of it, provides for labeling products which meet Smart Grid standards, provides for Smart Grid peak demand reduction goals, public information on Smart Grid technology and standards, inclusion of Smart Grid features in appliance rebate programs, and planning and siting of electrical transmission facilities in the Western Interconnection.
    These seven items briefly summarize only the first 151 sections of HR 2454, leaving sections 152-553 remaining. Many individual sections contain multiple sections within them, which are at least equally detailed and comprehensive as those above. In those proceeding sections, the federal government takes charge of energy research, energy efficiency, nuclear and advanced technology, energy efficiency in building codes, building retrofits, manufactured housing, lighting and appliance energy efficiency, transportation efficiency and emissions, industrial energy efficiency, and energy use in public institutions and communications.
Now, at Last, to Cap-and-Trade
    All of this and more comes before HR 2454 takes up prevention of reduction of global warming pollution. The bill declares global warming to be “a significant threat to the national security, economy, public health and welfare, and environment of the United States,” and further declares that global warming is the result of man-made greenhouse gas emissions. This latter declaration does not represent scientific consensus, despite its proponents’ assertion.
    Goals for reduction of greenhouse gas emissions are set with 2005 emissions as the baseline. By 2012, greenhouse gas emissions from all sources in the U. S. combined are to be reduced by 3%; by 2020, 17% below 2005; by 2030, 42% below 2005; and, by 2050, emissions are to be reduced 83% below 2005.
    Greenhouse gases are defined as including carbon dioxide, methane and nitrous oxide, plus other gases. The bill sets emissions limits for every year from 2012 through 2050, with the first year limited to 4,627 million metric tons and the last year limited to 1,035 million metric tons of emitted gases.
    The 2012 emissions limit is especially puzzling in light of the fact that 2005 emissions are stated in section 721(e)(2)(i) as 7,021 million metric tons. Thus, while the 2012 limit is supposed to be only 3% less than 2005, the stated limit of 4,627 mmt is actually 34.1% lower than 2005 emissions.
    Section 722 prohibits emissions exceeding levels allowed by the federal authority, section 723 provides penalties for violations, and section 724 authorizes public trading of rights to emit covered gases. In other words, parties who are given rights by government to emit gases but don’t wish to do so may sell those rights to others.
Rights Taken, and Given, by Government
    Until HR 2454 becomes law, Americans have the right which has existed in all history to expend energy for productive purposes, and to earn livelihood by doing so. No longer will this be true, if this bill or anything comparable becomes law.
    By giving rights to emit gases to a party who does not intend to use it, but limiting emissions by those who expend energy, the federal government creates a mechanism for taking private property from one private party and giving it to another. Section 721 authorizes allowances for emissions and is very detailed, yet its provisions are not at all clear regarding who will get allowances and in what amount. Apparently this is left to discretion of the “administrator.” If allowances are given to Party A who will not use them and are withheld from Party B who needs them, then B will have to pay money to A solely because the statute was enacted.
    The Takings Clause of the Fifth Amendment to the Constitution bars the federal government from taking private property except for public use and with just compensation. In 1798, deciding the case of Calder v. Bull, the Supreme Court of the United States held that a statute which takes property from A and gives it to B “is against all reason and justice.” The last 75 years of judicial improvement of a “living constitution” has quite obviously extinguished that fundamental protection of the Bill of Rights.
    Some who support “living” rather than “originalist” interpretation of the Constitution do so on grounds that protection of rights in property are believed to benefit the wealthiest elite rather than common humanity. In truth, the opposite is more often the case. Those with fortunes beyond measure find friends in government at every hand, regardless of constitutional rights. The commoner, by contrast, requires constitutional mandates binding government without fail in all instances or his rights do not exist.
    When adopted and ratified, the Bill of Rights was said to be non-exclusive and other non-enumerated rights were reserved to the people. Except in the case of a mother’s right to abort her child, which originated not in the heads of the Framers but in elitist disdain for population growth, court recognition of other unstated rights cannot be called to mind.
    Government transfer of capital from one private party to another is merely one means of rewarding political friends and punishing political foes – a means more socially advanced, some would say, than genocidal punishments inflicted by Hutus on Tutsis in Rwanda 15 years ago, but following a comparable political model. These political ends, however, are superficial and almost negligible relative to underlying motives and effects of the “clean energy and security” bill known as “cap-and-trade.”
Down-sizing to Elitist Production Model
    Energy available from natural sources is fundamentally essential to the productivity, competitiveness and prosperity of every human society. Without access to energy at economic prices, common people have no real chance to compete successfully with elites whose heritage includes practically unlimited resources. In this context, HR 2454 is a truly crippling blow to the Middle Class. That this legislation is part of international actions by government towards similar ends attests to reality that the Middle Class is under devastating attack globally.
    A prosperous, energetic Middle Class is the only competitor, or threat, to the world’s elite either in business or in political-governmental arenas. During its best times, America’s Middle Class has shown real capability to compete with and beat elite monopolists going head-to-head in the private economy. But influencing government power, even in republican democracy, is an uphill battle where the elite have historic, long-held advantages.
    Elitist domination of the House is transparent in the manner of HR 2454’s passage. The bill’s provisions are extremely tedious and complex, evidencing long and arduous drafting by special interests, staff and leadership, and yet its provisions were voted on within hours of initial publication and approved without reading by rank and file – either those in support or in opposition. Many House members reportedly preferred to vote in opposition to the bill due to their constituents’ opposition, and were released to vote against unless their vote was needed for passage. All of this reflects elite, influential players steamrolling passage of legislation known to be antithetical to the general populace.
    Why do the elite U. S. mercantilists want this cap-and-trade law? Beyond any question, HR 2454 would cut the size of U. S. economic production drastically. The scale of production would be reduced from the large, free market model to the smaller, monopolistic model favored by elite monopolists. The smaller production model would employ far fewer people, of course, with both the employed and unemployed being much less prosperous than is the case with the larger, free market production model. But in an impoverished world, elites deploy their great capital pools to acquire assets and resources for very low prices.
    This was true during 500 years of the monopolist, mercantilist production model known as the Dark Ages, and during the Great Depression when U. S. mercantilists imposed their version of the Dark Ages on America and the world. Even Franklin Roosevelt publicly argued that U. S. production had exceeded proper levels, that downsizing was the right thing to do, and that employment never could be as high again.
    HR 2454 embodies the premise that U. S. government should control emissions of carbon dioxide – an event which occurs naturally in human life itself and in all productive activities. The bill mandates reduction of such emissions by 83% within a span of 38 years. These concepts entail deliberate shrinkage of the U. S. production model far more severe than what was attempted and achieved during the Great Depression. It is a direct attack on the vitality and well-being of the Middle Class – an attempt to return the Middle Class to serfdom – and it ought not be allowed to succeed. ~