Wednesday, December 17, 2008

O.K. Truths on Cap and Trades

Lets call it a truths...
I had a reader ask me a complex (only because it involves politics) questions about the sustainability of carbon 'cap n trade' and 'Carbon Tax' programs - sorry for the lengthy answer with relatively simple conclusions.   
I know a lot of my readers have ideas on how to make 'energy and resource conservation tax incentives' and it is the golden goose, I am NOT criticising such plans. I am only drawing out bankrupt ideals of yet another ponzi market scheme. There is not joking around, this is a trillion dollar market that big U.S. & U.K. investors that crashed see as a cash cow to pull them out... will we ever learn?
It is why Bloomberg is calling for a carbon tax... - Why wouldn't a person driven by tax wealth not want to tax the biggest potential commodity?
Simple math - "It is the largest investment in a falling marketplace"
Also considering what they do, why wouldn't ANY broker or trader not want to get into "carbon trades"? As carbon based life "trading carbon" is the best scam since bottling tap water. Just think a little, regardless of what you use as a source, how you move or store it... carbon is anything we eat, burn or move.
Taxing "air" we exhale (CO2) may even be $better$, ohhh wait, we are trying to do that ;-)

Comments to a 'Canadian ecologically orientated individual' on 'Cap-N-Trade'
Haase - I appreciate the academic diligence that helped these people become Professor's of Economics, but the economics their education is based on no longer exist... and Any economist that does not understand that taxing energy increases the price of food, water and every essential of life for the middle class should have their library card revoked.
Why carbon taxing will do nothing but more harm
Why there such great demand for the carbon trade and tax markets
What will work (short examples)
Given that, here is the gist of the problems facing the carbon tax and trade markets...
Based on one of my favourite scientific quotes: "that is so wrong, it is not even right" - understanding that an idea can be so far off that it misses the basic principals of every key element the ideas structure is held together by.
Carbon Tax Question...(from the email) What do you think about a carbon tax?
Here in the U.S. on the brink of a finical implosion we are talking about 1.25 Trillion Dollar Tax Increase
From - “simultaneously pushing a global warming tax bill that will further raise gas prices, home energy prices, and do untold damage to the American economy by imposing the largest tax increase in American history.” As a result, at least 43 million families will owe at least $2,300 more in taxes each year. Additionally, 18 million seniors will owe at least $2,200 more each year, and 27 million small businesses will be hit with a $4,100 tax hike. This monstrous budget surpasses the $3 trillion mark for the first time in our country’s history and includes hundreds of billions of dollars in new spending.
FACT: A MIT study concluded that the carbon tax approach would impose a tax-equivalent of $366 billion annually, or more than $4,500 per family of four, by 2015. And the annual costs will grow after 2015. (
EXAMPLE of a Carbon Tax Answer...
Tax is a necessary financial tool that helps build infrastructure in key areas that are critical to the stability of a community and government. We CAN have taxes on expendable and "non-essential items" that can definitely help people and the environment *(see notable quotes below). I will detail my tax option (protects consumers more than any existing law) in my upcoming report.
An example of Tax collected from "high carbon items" could be used to offset purchasing costs of "low carbon choices"...
 in lieu of "grossly one-sided" overrun subsides (i.e. the "high carb' tax from 100,000 trucks would allow 1,000 people to purchase solar panels or geothermal heat). People with big pockets will still buy luxurious McMansions and Bentleys but allow an elderly couple or single parent family help to heat their home. Lets not forget the top consumer purchase$ are still "non-essential" items. Rewarding consumption based on "financial good choices" enables the underprivileged to afford cleaner energy. Without question, "taxing luxury items" that have massive energy needs should be the law". But, taxing the basic necessities to sustain life, should be a crime against humanity.
But we are not talking about taxes that help people or the planet. This is a tax that is designed to 'punish without remorse' the working and the impoverished class. These taxes are to "force choices on others that are nearly impossible to require of ourselves".

The long term carbon tax answer?
Sustainable energy is just that, after capital costs are paid for, sustainable energy pays back continually to investors (i.e. tax payers) because we are not "paying outside sources or influences for ever demanded finite energy commodities that can only go up in price with scarcity".
Clearly there is a payback period IF these plans include "true sustainable energy". How is it that these Economists "do not offer tax payers a return on investment"? I do not think any tax payer would have a problem investing in their future. But, by showing no long term benefits other than "prevent polar bears from drowning by buying unicorn rainbow power" offers tax payers no future of reduction of their financial burden.
I have viewed several plans that offer "direct financial benefits to tax payers"...making a plan based on taxing at a continual loss is unsustainable.
Carbon "the Commodity"
Carbon (cap-n-trade) market trading "the perpetual poor machine"... Today we "reward bad behaviour by providing financial gains and punish good behaviour by taxing the underprivileged".
The bad news (this is a market traders dream)
A market based on trading an infinite commodity (Carbon) will create a market that pits the financial powers of market traders and investors against naive consumers to exploit every dollar possible. Speculators will be able to make "historical runs on money" by simply generating ever changing market reports to reflect which "carbon sources investors should move to" with the top players historically staying ahead of these shifts by being the parties who generate the same speculation that generates the reports. Driving dividends to the market creators while pulling these dividends from weak investors - ie. "the perpetual poor machine".
This is a better scheme than even the billion dollar tax subsidized ethanol market where ethanol production uses more petroleum than it saves (great for both AG & OIL markets)
The good news (short life for losers)
Unlike the "ARM based American market", smart investors will see this "the perpetual poor machine" before it grows into a economy collapsing mistake.
The example of this insanity (doing the same things wrong over and over and expecting different results)
Where is all this dumb money coming from? Retirees who just lost the value of their homes and nearly everything in the bank. Tragically, the same individuals in government who push consumers to invest in paper money, federal dollars and market based trading will force the general population of non-investors (through flawed IRA's and 401k's) into programs that continue to include volatile market commodities (like mortgage and carbon) in public lumped retirement programs.
The mortgages fiasco is a great model as it is purely made up by the market, driven by speculators and sold to the public as a "stable investment". It is not real, tangible or a finite resource... just a "fear and greed" market.
Carbon quotes of mine you can use:
We are carbon based life forms that develop nearly everything into carbon based materials and if we were to "tax the air we breath" it would be less lucrative than taxing carbon. - Haase
Commodity prices are based on finite resources that hold lifetime use values which can be gauged, measured and then create trade market prices that will continue to grow as the commodity runs out. Thus, it offers both a positive return to consumers, investors and marketers during this process. Trading a infinite resource is not technically a "commodity market" - Haase

Thanks for asking these important questions. I hope I have provided some "fuel for thought"
Now my question to these same individuals believing carbon trading and taxes will save us:
We can not provide enough clean water or air for millions of impoverished with the same amount dying every year with "pollution" listed as the cause (not carbon). Nearly one third of our mammals (food chain) are entering the endangered list, with 1000's of entire aquatic and amphibian species they feed on disappearing. They die daily and their numbers are growing exponentially.
How does you economic plan help them and can "carbon offsets" or "carbon taxes" offset any of these souls?
Notable quotes on subject:
GRIST: Coal-fired plants will cost a lot more than natural gas once climate legislation is in place, and consumers will foot the bill "Neither are a cleaner or sustainable solution"
The world has gone crazy when Ralph Nader rants are the most "sane" options...
NADER: question - You propose a carbon pollution tax, for instance. How would that work?
NADER: answer - You tax inefficient technology and you tax pollution. The carbon tax would not be a credit exchange [as in a cap-and-trade program], which can be easily manipulated. It would be a straight-out tax on hydrocarbon production at the production source -- where it's far, far removed from consumers and forces better choices of technology from the get-go. Keep in mind that we're currently paying six, seven dollars a gallon for gasoline if you include all the military expenditures to safeguard the global oil pipeline. That's something that taxpayers are paying for, even if it doesn't show at the pump.
How to make money doing it?
FURTHER: You can basically eliminate all direct and indirect subsidies to fossil fuels and nuclear and say, "Let's have a level playing field." Or you could actively increase tax credits and subsidies to solar power because it has superior environmental and geopolitical benefits. Furthermore, the government's a big customer -- maybe it can take its entire procurement power and direct it toward solar energy and sustainable technology.