Linda Traynham, our Whiskey morning glory, had us poking into HR 2454 when she mentioned Texan Rep. John Carter’s amendments to it in her recent shot.

Ron Paul is right on the money in saying this bill will “sell pollution permits to the industry as the Catholic Church used to sell indulgences to sinners.”

But the intrepid Carter was no Martin Luther. Dem House leaders barred his amendments from floor debate on June 25. Carter was bested by the 309-page amendment from California Democrat — and bill sponsor — Henry Waxman. Of course, Waxman’s folly came to a floor vote before House Members had time to read it. HR 2454 squeaked by with seven more yeas than nays.

Harry Reid expects Senate results this fall. But in the meantime, let’s take stock and follow the money trail to the bill’s real supporters.

Behind That Green Machine, Pope Goldman Is Pushing

Project Cap and Tax began with the unholy Enron. That blind Cyclops of Energy pushed hard for cap-and-trade policy before its 2001 demise. But you’ll never believe who wanted in on it next.

Insurance titan AIG. The once-proud member of USCAP.

AIG knew creating exotic “insurance” wasn’t going to stay profitable much longer. But investing in currently worthless carbon credits and tanking alternative energy companies COULD mean big-time money — if Congress wanted it.

Back in 2007, then-CEO Martin Sullivan wanted to jump in feet first, saying that AIG:

“can help shape a broad-based cap-and-trade legislative proposal, bringing to this critical endeavor a unique business perspective on the business opportunities and risks that climate change poses for our industry.”

Note that Sen. Dodd has been AIG’s donation darling since 1990 — netting $284,000 from AIG’s employees, executives and PACs. And right now, Chris Dodd can help make the Senate’s version of the cap and trade. He’s so pro-cap and tax he wants to tack on a carbon tax — above and beyond cap and trade — that he hopes will generate $50 billion annually for renewable energy research..

But in February 2009, Joe Barton (R) led to charge to cut AIG out of USCAP. He cited AIG’s use of taxpayer money to finance lobbying activities. Point for cap-and-trade critic Joe Barton! We bet GM will drop from the USCAP roster if Barton has a hand in it.

But AIG’s single biggest counterparty will pick up the slack. Goldman Sachs spent $3.5 million on climate issues alone last year.

Then on Jan. 12, 2009, former Goldman CEO Hank Paulson offered think tank Resources for the Future (whose chairman of the board is also a Goldman alum) this interview: “How Markets Can Help Address Climate Change and Other Major Environmental Problems.”

We doubt this interest is merely because Hank Paulson is a lifelong bird-watcher.

Paulson confides that he “could see at Goldman” the value of carbon credits: “to come up with a system ultimately that has got credibility or is verifiable, that when someone pays to avoid it, you know, a ton of carbon emissions, they know they’re really getting a ton of carbon emissions avoided.”

When pressed, Paulson pooh-poohed the carbon tax. He said a tax wasn’t transparent, as the cap and trade was — amid crowd hoots and howls of laughter — as he emphasized the words “fair,” “credible,” “efficient” and “transparent.”

Is this the same man who guaranteed an efficient, transparent, and, um, highly credible, unregulated credit default swaps market? Is this the same purveyor of the clarity and transparency of the Moody’s and S&P ratings on bundles of mortgages?

But where Paulson may have stepped down, a new pro-CAP man steps up.

Treasury chief of staff Mark Patterson clocked lots of time across the street from Capitol grounds. From 2005 until April 11, 2008, he lobbied for Goldman as VP of government relations. While you’d think allowing a former lobbyist to work on an issue he has lobbied for within the past two years would besmirch Obaman ethics, we’ve been assured that he “steps out” of such matters at the Treasury, like a judge stepping down from a case. Yeah, sure he does.

Goldman likes cap and trade for one big reason: Its investments depend upon it.

Follow the Money Trail to Mr. Derivative

When you ask who’s the biggest winner if the bill goes through, you’ll find the Chicago Climate Exchange (CCX), co-founded by Hank Paulson and Al Gore. Members include Amtrak, DuPont, Ford, Oakland, Chicago, and the Iowa Farm Bureau.

The whole idea is the brainchild of Richard Sandor — aka “Mr. Derivative.” He’s the guy to thank for interest rate futures, as well as earthquake futures. In the early ’90s, he pioneered the collateralized mortgage obligation(CMO). And while you might not know exactly what a CMO is, you’ve probably heard the name Kidder, Peabody — where Mr. Derivative worked. By the mid-’90s, it held 28% of the total world CMO pie on its own balance sheet. Surprise, surprise, it all blew up in 1994, forcing the 130-year-old firm to the auction block — because of toxic instruments that look an awful lot like the mortgage securities that just blew up on us in 2007.

Do you feel confident?

Goldman sure does. It owns a 10% stake in it. It also owns a 19% share in CCX’s parent: Climate Exchange Plc. It nearly doubled its holdings in January 2009.

The icing on the cake is its stake in Blue Source, a Utah-based purveyor of carbon creds. In 2005, when Paulson drew up the bank’s environmental policy and started Goldman on a stream of energy partnerships, investments and subsidiarys, he offered this comment: “We’re not making those investments to lose money.”

In 2009, Goldman got caught up in a botched IPO of its investment Changing World Technologies, which turned Butterball turkey offal into diesel — at the cost of $80 a barrel — before filing for Chapter 11. You can bet Goldman will ensure this sort of misstep doesn’t happen again.

Government-Guaranteed Price Hikes

The government “cap” is what makes this market a true racket.

As Peak Oilers know, the less and less of a dwindling resource, the higher the price you can get from the people that need it.

Capped carbon follows the same logic. We start with a high cap of carbon pollution and that’s the national limit of how much CO2 can be emitted that year. Each year, that cap shrinks a little more, and the next year even more, until we reach the “no-harm” level — which some environmentalist absurdly place at zero.

Now here’s the catch. The government divvies up the shares of emissions among businesses that produce or consume energy. (This handout may be based on history of consumption.) Say hello to a new breed of lobbyist pimping a whole new tier of Beltway bureaucracy.

The “surplus” credits will trade on exchanges like Chicago Climate Exchange or Blue Source, allowing companies to outbid each other for the leisure of producing more than the government said they could.

Each year, the government will hand out fewer and fewer emissions indulgences. Meaning there will be fewer credits to trade. And we commodity buffs know that the less there is of something, the higher the price rockets.

And the Chicago Climate Exchange will score larger and larger sums from the corporate carbon largesse. Goldman and company have everything to gain from this.

And you’ve got to ask: What exotic new derivatives can come out of this? Will institutional investors bet on futures of how much the government will lower the cap in 2025…2030? Wait, there already is a Chicago Climate Futures Exchange. Of course, it’s the wholly owned subsidiary of the Chicago Climate Exchange.

Could the coal companies purchase carbon default swaps? After all, what happens when they discover the hydropower credits they bought in Brazil didn’t quash emissions as much as anticipated?

That brings us to a big flaw: Does it really work?

Capital Abandons Its Own Carbon Purchase Scheme

The best part of this swindle? It’s hard to tell if it’s a swindle. You see, the credits fund development projects in countries like India or Brazil, for installing things like hydropower plants or rice husk-fired generators. Watchdog group International Rivers concluded that three-quarters of these projects would probably have been funded anyway, since they were already completed at time of approval.

Consider tree planting. How do you measure the carbon offset? It all changes based on soil and climate conditions, not to mention growth rate. Only when a tree has lived 100 years does it become a net carbon absorber.

Mr. Sandor doesn’t care if it works or not. He finds the debate: “quite interesting, but that’s not my business…I’m running a for-profit company.”

So why does the House of Reps think cap and trade will work? Well, it shouldn’t — based on recent experience.

It’s “Green the Capitol” campaign began with compact fluorescents. Then it switched to natgas power to keep the lights on. But the Capitol still wasn’t carbon neutral, so the House bought 24,000 metric tons of carbon offsets on the Chicago Climate Exchange. (Yep, through the same outfit owned 10% by Goldman Sachs.) But in February, after not being able to confirm that it offset any of its carbon, the House dropped all plans to “go green” with offsets.

So we have a classic case of “do as we say, not as we do” from our honorable reps.

We got the above anecdote from Ted Gayer — who worked a single year as deputy assistant secretary of economic policy at the Treasury: 2007-2008. Wonder if the unpopularity of his opinions turned him toward Georgetown professordom?

Lest we leave out another odious option, let’s talk direct carbon tax. The carbon heavies would pay a penalty for the carbon content of their products. The idea is that companies would cut emissions for the sake of avoiding the tax. But they’d probably just tuck the added cost into what you and I will pay.

So that’s our choice: A private tax collection scheme that’s government backed or yet another Fed tax that business will probably loophole its way out of.

Either way, Shooters, we’ll end up with a case of cap and stick it…and you’re holding the bag, as usual. Estimates from various sources say you could pay $175-3,300 per household because of it.

The only way to trump this system? Hope the government will hand us a set of credits for owning — but not using — our clothes dryer…and then, as we hang our clothes to dry in the free sunshine, selling our credits to the highest bidder via the Blue Source Exchange.

Of course, if you feel the need to storm your senator’s home office during the summer recess, we wish you luck.

Regards,
Samantha Buker

July 8, 2009

Cap and Trade Shenanigans with the Chicago Climate Exchange was originally featured on Whiskey and Gunpowder

A new area emerged from the update Rep. Carter sent me, one to be expected:  lo and behold, those poverty-stricken families who make no more than $42,000/year are going to receive “energy stamps” so that only the middle class–which Mr. Obama defined as those making up to a quarter of a million dollars a year–are going to bear the brunt of increased prices.  Fancy that.  What a nifty little dividend for core Democrat voters, new entitlements that tap the public till for gas money and utility bills.  That isn’t going to seem quite as great when they find out that everything goes up when energy does.  Shoes, lollipops, dog food, basketball tickets…

“The debate over this bill is over how much it will raise prices for consumers,” House Republican Conference Secretary Carter said. “Democrats contend the effect will be minimal, so they should have no problem adding these two amendments just to make sure. A vote against either will therefore be a recorded vote to raise energy prices on consumers.”  I would have had a twinkle in my eye if I had uttered those words on the floor of the House because twitting Democrats is always good fun.

Polls from all political angles (Gallup, WSJ, Rasmussen, Fox, CNN, NBC, The Los Angeles Times, USA Today, ABC, Planet Green, Stanford University, and Quinnipiac Universities, among others) are turning against “hope and change” and being force fed socialism like a Strasbourg goose.  They show clearly how many of us want what, and here it is, courtesy of Rep. John Carter:

1. Expanded wind and solar power – 81% public approval
2. No new energy taxes – 74% public approval
3. Lower energy prices – 72% public approval
4. Continue existing oil and gas support – 65% public approval
5. Expanded offshore and Alaska oil drilling – 63% public approval
6. Expand nuclear power – 60% public approval

If the bill that comes out of the Conference Committee is no worse than what has been proposed thus far–and this year all such bills do–what we’re going to get is at least an additional dollar a gallon for gas, and much higher electrical, propane, and fuel oil bills for our homes, in addition to raising prices across the board.  Offshore drilling and that in Alaska will be blocked, and existing drilling taxed.   Expanding nuclear power will be prevented by denying the storage of nuclear waste storage at Yucca Mountain, Nevada, while Congress and the White House carol that our electrical needs will be met by new nuclear power plants and vast fields to harvest solar and wind energy.  Those last two require enormous capital outlays and have their own hurdles, including protests about sullying the sacred desert habitat and the cost of erecting vast windmills that turn only when the wind is at sufficient strength and have to be shut off when there is no “storage capacity” for the electricity generated.  I couldn’t say “demand” because there is always a need for electricity; the problem is the electricity has to have somewhere to go or the mill has to be stilled.  As a technical explanation that leaves much to be desired, but it gets the point across:  this isn’t like a kindergarten class holding pinwheels on a breezy day.  Those multi-million dollar towers are stilled by lack of wind and lack of demand (draw.)  With hydroelectric plants “excess” electricity can be used to pump water back up to the lake or reservoir; obviously, it isn’t feasible to send the wind back whence it came.

Drive by the enormous wind farm outside El Paso and see how many of the massive monoliths stand motionless while others spin on any given day.  We aren’t able to use the capacity available now, and Texas has the only independent power grid in America.

The stage is set to destroy the coal industry which provides fifty per cent. of our power; that diminished capacity is not going to be restored by nuclear power plants which will not be allowed to be built and would require between ten and twenty years between obstructionists, greed, theft, and Cape Cod millionaires who block wind generators because they would block the view from their mansions.  Solar panels are costly and fragile, do not work at night, and have eco-opponents…Tidal and volcanic/thermal proposals look good on paper but they are far from “shovel ready.”

“Renewable” resources are a pretty dream but they are nothing to stake our energy supply on at present levels of technology and political forces.  In my book they aren’t anything suitable for private investors unless we throw a little money in one and see if it returns a profit in about twice the time it takes to cultivate a new truffle field.

Regards,
Linda Brady Traynham

July 1, 2009

The Fate of Representative John Carter’s Proposed Amendments to Cap and Trade was originally featured on Whiskey and Gunpowder

Basically, the government sets up a national limit for carbon emissions. This is meant to slow the changes that are supposedly occurring to the atmosphere, and by implication threatening the long-term health of the Earth’s climate systems.

Under the national Cap & Trade limits, industry has to obtain rights to emit carbon dioxide (CO2) or find another source for energy. This will lead to a new market for carbon-credits and carbon-trading. Industries that hold carbon permits will be able to operate. Industries that lack carbon permits will face shutdown and probable extinction. One way or the other, the economy will immediately transform into a system where one’s industrial fate is controlled by the carbon permits.

For example, carbon permits will dramatically alter the future for coal-based electricity. If coal gets burned at all, the Cap & Trade requirement will enforce CO2 sequestration — an utterly embryonic technology of which there is not a single large-scale working example anywhere on the face of the planet. And the coal-fired electricity under Cap & Trade will be much more expensive.

So non-carbon alternatives like wind, solar & geothermal will be more competitive as well. There is also a gratuitous plan to handicap the nuclear industry, despite the fact that nuclear power is essentially CO2-free. Old environmentalist habits — like hating nuclear power — die hard.

But the higher energy costs of production will have to pass through to consumers. At the end of the consumption chain, people can expect to pay higher prices for most everything that contains an element or two of electricity. (Gee, what might that be?)

In essence, the government will be setting up a new Federal Reserve, except instead of governing the nation’s money supply and quality, this new “Cap & Trade” Fed will govern the nation’s supply of energy. At the end of the day the “Carbon Fed” will control the output of the nation’s energy supply. In the long run, this may be more important than controlling the supply of credit or even the gold supply. Really, without electricity gold may yet prove to be a barbarous relic.

But consider how little most people knew about the original Fed when its enabling legislation was passed (in the dead of night) on Friday, December 23, 1913 — yes, almost Christmas Eve. The Panic of 1907-1908 was fresh in the minds of many observers. In that Panic, the U.S. money supply had simply dried up. The nation was broke, and even the U.S. government had to borrow money from the house of JP Morgan.

So by 1913 there was a basic political consensus that the nation ought to have some sort of “elastic” element to its currency. Most economists and policy-makers agreed that there had to be a way of increasing the nominal money supply quickly, especially when economic conditions led to a “panic” that dried up the circulation of dollars. Yet few understood the nature of the powers that the Federal Reserve Act was creating and placing in the hands of a quasi-independent monetary body. And even fewer were thinking about the political difficulty of pulling back those excess dollars when the panic abated.

Indeed, the U.S. Fed coexisted with a $20-gold standard for the next two decades. It was no curious coincidence that within a few short years, the U.S. was able to “afford” to participate in World War I, courtesy of the credit-creating mechanisms of the Fed.

Later on, when the central government needed more funds during the depths of the Great Depression, the $20 gold standard became untenable to the monetary managers. So in one of his first acts as U.S. President, Franklin Roosevelt signed an executive order that simply seized the nation’s gold and consequently unleashed the flood of fiat dollars into the monetary base of the nation. The dollar has never been the same.

This note is not to re-hash the history of the Fed. It is just to remind that the so-called “Climate Security Act” may claim to be all about Cap & Trade. But Cap & Trade is not just about “Climate Security.”

In the name of reducing the emission of CO2, the government is creating a means to control the economy down to the last electron. This is a power that not even the Fed holds.

Until we meet again…
Byron W. King
June 20, 2008

P.S.: Many oil-supplying nations are simply running out of the light sweet crude oil that we need to live our lives. In it’s place they’re coming up with heavy, dirty, raw oil. That oil needs to be refined, and we simply don’t have the refining capabilities. But that may not be a problem after all. A new breakthrough may have made oil refining a thing of the past, and given us a way to use all the world’s oil immediately.

Cap and Trade was originally featured on Whiskey and Gunpowder