Hillarysworld

Toronto Sun

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Cap & trade 'corporate welfare'

Giving away free carbon credits to industry makes no sense for the U.S. -- or for us

By LORRIE GOLDSTEIN, ASSOCIATE EDITOR

Last Updated: 10th January 2010, 11:08am

Prime Minister Stephen Harper says Canada must mirror the Barack Obama administration in the U.S. on climate change.

Unfortunately, that doesn't explain what Canada is going to do if the Americans do something stupid.

Problem is, we know the U.S. is about to do something stupid -- which is to set up a cap-and-trade market in carbon dioxide emissions in which 85% of the carbon credits will be given away to industry for free.

How do we know this is stupid? Well, as David Wessel observed in The Wall Street Journal, we know it from Obama and his budget director, Peter Orszag.

Last March, Obama told U.S. business leaders: "If you're giving away carbon permits for free, then basically you're not really pricing the thing and it doesn't work -- or people can game the system in so many ways that it's not creating the incentive structures that we're looking for."

Orszag told the budget committee of the House of Representatives that if you don't auction the permits, "it would represent the largest corporate welfare program that has ever been enacted in the history of the United States."

Two months later, the House passed the Waxman-Markey climate and energy bill. In the horse trading to get it approved by a razor-thin margin of 219 to 212, the Democrats gave away the store to industrial emitters -- at the expense of taxpayers -- by agreeing to give away all but 15% of the permits.

GIVEAWAY WILL REMAIN

The U.S. Senate is working on its own version of the bill, and at some point the two efforts will have to be melded. But there's little doubt the permit giveaway will remain.

That will gut Obama's original plan to raise $646 billion between 2012 and 2019 by auctioning 100% of the permits to industry. That money was supposed to pay for $150 billion in clean energy projects over the next decade, plus provide a tax credit to help Americans cope with higher energy prices.

Despite this, Obama called Waxman-Markey "historic" legislation, presumably because he thinks half a loaf is better than none. The problem is with an 85% permit giveaway there's no loaf, and no guarantee plans to auction off all the permits by 2030 will ever become a reality.

The U.S. is going down the same disastrous road the European Union did five years ago when it created its cap-and-trade market, the Emissions Trading Scheme (ETS). It, too, gave away the permits for free. That doomed the ETS' effectiveness in reducing greenhouse gas emissions, along with another huge blunder EU bureaucrats made by handing out more permits than emissions. (The point of cap-and-trade is to lower the "cap" over time, not raise it.)

I'm no fan of cap-and-trade. The European model is a carnival of corruption, profiteering, speculation and multi-billion-dollar fraud. It's done nothing to improve the environment while handing undeserved profits to big business and driving up the cost of energy to consumers.

That said, if the U.S. is stupid enough to implement cap-and-trade, and if we're stupid enough to follow, let's at least do it in the least stupid way.

The only way cap-and-trade can be effective in reducing emissions, which is the point, is if (a) all carbon permits are auctioned (b) no industry is exempt (also the opposite of what happened in Europe) and (c) the government develops an effective, enforceable mechanism for lowering the cap on emissions.

PRICE HIKES FOR US

Will all this hike energy prices for consumers? Absolutely. Big time.

More . . .
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Well, folks, our neighbors do not like it either!

The Cap & trade is sure sounding like a big ponzi scheme!