Going Beyond the Global Warming Debate

The Telegraph in the U. K. is running an opinion piece that sums up much of the case against the "warmists", titled A perfect storm is brewing for the IPCC; The emerging errors of the IPCC's 2007 report are not incidental but fundamental, says Christopher Booker.

I am not going to quote from it but will rather go in a different direction.

There is little question that cap-and-trade is a gift to special interests such as the financial industry, for which a fully implemented cap/trade regime would probably be the largest business line in history-- profits which would be paid by you and me.

Let us go back to fundamentals and not pretend to know the extent to which global warming is occurring and if so whether it is due to human industrial activities.

It's easier to come to a practical solution without trying to know the unknowable but rather to stick with basic principles.

Basic principles are that resources are finite, that in most systems of government, financial accounts need to balance, and that first and foremost, economic systems need to meet the basic human needs of food, shelter, etc.

Another basic principle of economic thought is that Adam Smith's capitalism does not give weight to externalities such as pollution caused by, say, a manufacturer's pollution of a lake used for pleasure fishing but for which the fishermen do not pay dock fees or the like.

A simple way to account for loss of value of a public good such as a pristine lake or a mountaintop that would be destroyed by coal mining is to assess a value to those losses and have the business treat such costs as an input to costs just as much as labor and raw material costs are counted.

Thus, whether fossil fuels, potash or many other nonrenewables are produced, they can be taxed according to the replacement value (which rises over time as the easiest deposits are depleted first) of the resource plus an estimate of environmental damage, or some other similar scheme.

Climate considerations aside, it is difficult to see how an electricity-intensive advanced world and an automobile-poor emerging world are going to find more and more fossil fuels near today's prices to fuel the growth. Price will ration these resources better than any regulatory scheme. It may be better for, say, government to force resource-depleting companies to price in tomorrow's market price today as tax. Paradoxically, doing so will keep market prices lower than they would be in the future, by discouraging consumption of nonrenewable resources in favor or renewable goods, such as those derived principally from human imagination such as the performing arts, medical services, education, etc.

If such an idea occurs, look for resource-based companies to lose value. It would be better for governments to take advantage of the slack in the global economy and avoid taxes on useful things such as work effort or medical devices and instead obtain an increased share of government's revenues from industrial activities that are underpriced to the extent that resource depletion and environmental damage (including non-economic damage) are not considered as input costs by the companies involved.

Copyright (C) Long Lake LLC 2010

What The Who Have to Do with the Federal Budget and Cap and Trade

The administration's next-year budget includes the assumption that revenues from the cap-and-trade bill will pad the Federal coffers. Yet as the snowiest winter in Washington's history drags on, the former insurgent theory of antropogenic global warming (AGW) is now burdened by being the orthodoxy. It is now prey to criticisms that in its younger days it could hurl at Big Oil and the like.

Most readers are familiar with the case of the U. of East Anglia (UEA) in Britain, a hotbed of research and centralized data collection for AGW. Internal documents were leaked/copied several months ago that embarrassed various researchers, and Dr. Phil Jones has taken a leave of absence from his role as head AGW-er at the UEA. The university has seen fit to appoint a board of inquiry, headed by an apparently neutral Scot named Muir Russell. The Telegraph has published a column that implicitly questions his neutrality and explicitly points out why one member of the review team has already resigned, in Climategate: the official cover-up continues:


1. The inquiry has not even begun and already it has told its first blatant lie – seen here on its official website.

Do any of the Review team members have a predetermined view on climate change and climate science?
No. Members of the research team come from a variety of scientific backgrounds. They were selected on the basis they have no prejudicial interest in climate change and climate science and for the contribution they can make to the issues the Review is looking at.

DoctoRx here. It turns out that the editor of Nature, Dr. Philip Campbell, is an ardent AGW-er, and was forced to resign less than 24 hours after the composition of the review team was announced.

But there's more. From the column:

But are we to feel any more confident about the alleged neutrality of another of Sir Muir’s appointments, Professor Geoffrey Boulton?

Bishop Hill certainly doesn’t think so. He notes that Professor Boulton….

-spent 18 years at the school of Environmental Sciences at the University of East Anglia
-works in an office almost next door to a member of the Hockey Team
-says the argument over climate change is over
-tours the country lecturing on the dangers of climate change
-believes the Himalayan glaciers will be gone by 2050
-signed up to a statement supporting the consensus in the wake of Climategate, which spoke of scientists adhering to the highest standards of integrity
-could fairly be described as a global warming doommonger
-is quite happy to discuss “denial” in the context of the climate debate.

You wonder, if Sir Muir really is that determined to keep his inquiry totally unbiased, independent, above-board and scrupulously neutral why he just doesn’t go the whole hog and appoint Al Gore, James Hansen and Rajendra Pachauri. I doubt the conclusions they’d reach would be any different.

So much for an inquiry we can believe in!

Given the obvious arrogance of the now-entrenched interests on the side of the AGW hypothesis, the severity of our economic downturn, and the fact that cap-and-trade benefits the financial community and has already been a source of a major scam or two in Europe, the chance that the Feds see any revenue from a bill that stalled in a Senate when there were 60 Democratic caucus members appears small to me. What does Barack Obama know that the rest of us don't?

Regarding cap and trade and the Federal budget, my strong suspicion is that there is a lot of hope there, and that things had better change fast for their assumptions to be valid.

Financial markets are fickle. The government is enjoying record-low borrowing costs. What happens if the speculators leave the small fry such as Greece and focus on big fry such as first the U. K. and then the U. S.?

The U. S. government is borrowing most of its money short term. This worked out poorly for Bear Stearns and Lehman Brothers, as well as for Washington Mutual etc.

If the government really wants to run massive deficits, it should do so by locking in the money with long-term financing.

And in any case, using unrealistic assumptions about revenues from a cap/trade bill is irresponsible.

It's past time for the stock- and bond-holders of Big Finance to realize their losses. Having just seen The Who at the Super Bowl, the U. S. taxpayer is tired of being fooled again and again and again.

Copyright (C) Long Lake LLC 2010

Cap and Trade Should Be Decapitated

Bloomberg.com reports on the cap and trade scam in EU Needs ‘Decisive Action’ After New CO2 Fraud, Barclays Says:

European regulators need to take “decisive action” after a new round of fraud tainted the world’s biggest emissions market, according to the head of carbon trading at Barclays Capital.

Germany’s Federal Environment Agency said Feb. 3 that about 250,000 CO2 allowances with a market value of 3.2 million euros ($4.4 million) were improperly transferred after cyber attacks. The so-called “phishing” incident comes after Europe lost a total of 5 billion euros in revenue for the 18 months ending in December 2009 because of value-added tax fraud in the CO2 market, according to Europol, the law enforcement agency.

“Without consistent and decisive action by the European Union, the world’s flagship carbon market will become mired in fraudulent activity,” Louis Redshaw, managing director at the investment-bank unit of Barclays Plc, said in a phone interview.

The solution is simple (read the article to show how bureaucratic this is all getting). Since governments need revenue, and their are many good reasons beyond the uncertain climate change argument to restrict fossil fuel use, just tax their production, manufacture and use. All this trading is not only an invitation to fraud but is at base a giveaway to the same trading mentality that led to the recent, ongoing financial and economic crisis.

Copyright (C) Long Lake LLC 2010

Emphasizing the Trade in Cap and Trade:

Yesterday, in Cap and Trade Will Likely Pass Because It Favors Big Finance, EBR opined that in keeping with the actions of the current and two prior administrations, a "climate change" bill based on creating a trading market would likely pass because it provides a large, unending previously undreamt of revenue stream for the financial community to profit from and which will undoubtedly be dominated by Big Finance rather than by small players.

A straightforward tax on carbon as it is used for fuel, floated briefly and timidly by the Clinton-Gore White House, has been given no consideration by the parties to the cap and trade juggernaut.

This view is supported by an article that appeared today on Bloomberg.com:

CO2 Traders Hedging Against New Climate Laws, RNK Capital Says

Carbon traders will buy more option contracts this year as a hedge against new climate laws and devaluation of credits for richer nations that help cut greenhouse gas in the developing world, RNK Capital LLC said.

Ken Schneider, an options trader at New York-based environmental hedge fund RNK, said investors are buying put options on speculation there will be new restrictions on United Nations’ Certified Emission Reduction credits.

How much simpler and less expensive to simply tax carbon-based fuels more heavily!

For the followers of the geniuses who eviscerated the Glass-Steagall separation of investment banking from conventional depository-based banking, who ruled that collateralized debt swaps were the only form of insurance that AIG could write that required no reserves, and who bailed out financial institutions with trillions of dollars with no upside for taxpayers other than that these same institutions could then lend the taxpayers that very same money at a profitable rate of interest, the only way is "Blank" and TRADE.

Copyright (C) Long Lake LLC 2009