Disclaimer

DISCLAIMER: The foregoing has been prepared solely for informational purposes, and is not an offer to buy or sell or a solicitation of an offer to buy or sell any thought or instrument or to participate in any particular thought process. I am not a seminarian, an economist or a politician, but this blog may contain thoughts that may pertain to any of the above, and these are just my thoughts on the date of record. I reserve the right to change my opinion or thoughts based on new information, new misinformation or life experiences. Although not all thoughts may necessarily be original (after all, there is "nothing new under the sun"), I will do my best to point out where I have borrowed other's thoughts and ran with it. WARNING: Continued reading may result in headaches, apparent loss of intelligence or apparent gain in intelligence, or initial annoyance at the writer of this blog. This blog is not intended for the weak at heart, the ill-tempered, or people who already know it all. Read at your own risk, and only post or email comments to me in a friendly manner if you really expect or desire a response. Consult your family therapist before reading this blog. If the views of this blog are overly offensive to you, seek immediate attention. The thoughts provided are not meant to raise your blood pressure - just to get you thinking, but in certain cases, may require an increase in blood pressure in order to get you thinking. Clark's Thoughts may not be suitable for all people.

Friday, June 5, 2009

It's a gas!

I am not an energy expert. I have no training in the subject, and I have never been involved in any industry that has had to worry about carbon emissions. There are many more people in our community better suited to write a column on this topic than I am, but since most Hoosiers, as well as the majority of Americans, are nearly as clueless as I am on the subject, I decided to look into it a little bit in hopes of gaining a better understanding.

HR 2454, the American Clean Energy and Security Act, sets the groundwork for a "cap and trade" system when dealing with carbon emissions. What exactly is cap and trade?
Each individual company will have a limit on the amount of carbon it can emit into the atmosphere. The company would have to have a permit for every ton of carbon dioxide it emits. The permits then serve to limit, or cap, the greenhouse gas pollution that the company is permitted to emit.

Keep in mind that a company will have to pay for these permits. The government may dictate how many permits a company can purchase, and then it is up to that company to either make sure they comply with not emitting more carbon than the permits allow, or buy purchasing additional permits from other companies that reduced their emissions quicker than anticipated. This is where the "trade" comes into play.

For some companies, it will be easy to reduce their amount of emissions and sell their extra permits to companies that are less fortunate. Other companies, in other industries, will be forced to purchase those permits at market price or face hefty fines.

Why does the government want to issue a cap and trade program? Maybe they really want to reduce the amount of greenhouse gasses, but my guess is they are really looking for an income stream. Each year the companies must purchase the permits. Each year the government rakes in some extra cash.

About two weeks ago, the Governor of Indiana, Mitch Daniels, wrote an outstanding Op-Ed in the Wall Street Journal. (May 15, 2009 – "Indiana Says ‘No Thanks’ to Cap and Trade") Regardless of your politics, I think that Mitch did an outstanding job in the letter, and if you are interested in this subject, I would recommend that you look it up on the internet.

Mitch believes that passage of this bill, a bill that would penalize some of our alternative energy initiatives in Indiana, would do little more than to double electric bills in our state. Not only does Mitch argue that Indiana would lose plenty of jobs because of this system, but a study by Buckley and Mityakov show that estimates of job losses attributable to cap-and-trade range in the hundreds of thousands, with the price for electricity, natural gas, and gasoline also increasing exponentially. Mitch goes on to call this an "imperialistic" bill, with states like California, Massachusetts and New York reaping the benefits of these new taxes at our expense.

I know that this discussion on cap and trade may seem one-sided, and I am as much in favor as being green as the next guy, but Indiana has been a frontrunner in biodiesel, ethanol (take CIE in Marion for instance), and clean coal technology. We are working for a greener world. Why should we be penalized for our efforts?

One final quote from Mitch on this topic, and again, I would encourage you to read the May 15, 2009 article:

"And for what? No honest estimate pretends to suggest that a U.S. cap-and-trade regime will move the world’s thermometer by so much as a tenth of a degree a half century from now. My fellow citizens are being ordered to accept impoverishment for a policy that won’t save a single polar bear."

Those are not my thoughts; they are Mitch’s. But from what little I do understand on this subject, I would tend to agree with him.