Friday, December 18, 2009

Cap And Trade In Practice- Kanjorski and Union Workers Take Note

Cap and Trade in Practice
How to get paid for laying off workers.

Since Paul Kanjorski voted FOR Cap And Trade it is time to educate the public about its dangers. Did anyway tell Kanjo that the biggest energy industry in his district is COAL? Here are his comments on why he voted YES.

"By no means is this energy bill perfect, but today, refusing to act was not an option. We need to begin the process of decreasing greenhouse gas emissions, creating clean energy jobs in America, and reducing our dependence on foreign oil. Change in our energy economy will not happen overnight, but it is clear that in this situation, the positives outweigh the negatives. The University of Massachusetts estimates that 1.7 million jobs will be created by transitioning to a clean energy economy.

"I deeply understand the real concerns regarding the additional costs for consumers and businesses that are essential to the economy, especially during these difficult economic times, and I hope that the bill which emerges in consultation with the Senate will further address these concerns. I believe that the small incremental costs associated with this bill are a small sacrifice that we can all make to ensure the well being of this country in the long-term.

So Paul, two questions? Do you support and are you willing to back Mayor Barletta's plan to construct a clean, green solar power plant at the Hazleton Municipal Airport property? Since you are willing to force consumers to pay additional costs how would you rationalize attacking Barletta for raising property taxes for one year as a temporary budget stop-gap measure? Unlike the federal government that can "print paper" anytime it needs money municipalities like Hazleton do not have that luxury.

From The Wall Street Journal:

The world's carboncrats are beavering away this week on a vast new global cap-and-trade scheme that President Obama wants the U.S. to join. But before we do, maybe Americans should understand how this already works in practice. Union workers, take note.

The Kyoto Protocol of 1997 required signatories to reduce their carbon emissions, and the European Union in 2005 launched its own cap-and-trade system. The program sets a limit on carbon emissions, and companies are issued free carbon allowances that they can buy or sell based on their emissions needs.

Fast forward to this month's news that Corus, Europe's second-largest steel producer, is shuttering a giant U.K. steelmaking plant at Redcar, cutting 1,700 jobs. Corus blames the recession that has cut steel demand and says the British government hasn't done enough to help it.

Whatever the truth of that, there's little doubt that cap and trade made the closure much easier. The decline in steel production means European steelmakers have surplus carbon allowances. According to Carbon Market Data, a European research firm, in 2008 Corus had the second largest surplus of EU carbon allowances—7.5 million.

The EU is looking for ways to drive today's depressed allowance price of about $21 apiece back up to former highs of about $50, so Corus has the potential for a $375 million windfall. By closing Redcar's annual capacity of three million tons of steel, Corus will produce six million fewer tons of CO2. That means more carbon allowances, which could translate into about $300 million a year if credits hit $50. Corus is essentially being paid to lay off British workers.

Corus will also profit if it moves the production to India. As part of Kyoto, the United Nations created the Clean Development Mechanism to encourage Western companies to invest in developing-world factories. Participants are financially rewarded based on the amount of carbon they "save" with more efficient plants.

Corus was bought in 2007 by Tata, India's largest steel company. The Indian steel industry is set to more than double production to some 124 million tons a year by 2011-2012. Were Corus to move production to a "clean" Indian factory, it could receive hundreds of millions of dollars annually from the Clean Development Fund. The kicker is that none of this results in fewer carbon emissions. A Corus plant in India might be more efficient by Indian standards, but it will be no more efficient than Redcar.

We should add that all of this is precisely what Kyoto envisioned. The idea is to tax Western industry and then send the proceeds to developing countries as an incentive to join the anticarbon crusade. But unless governments close their borders to foreign investment, business will flow to where the carbon tariff is least punishing. China and India understand this, which is why they won't agree at Copenhagen to anything that reduces this advantage.

The Corus story also shows that cap and trade isn't really a free market. Markets develop to efficiently allocate resources and capital. Carbon cap and trade is a government-rigged market, in which carbon allowances are dispensed based on political influence. Such a system is ripe for manipulation, and Corus is merely the latest example.

To summarize: Cap and trade is a scheme that would impose heavy carbon taxes and allowances on U.S. industries, which would then have an incentive to move overseas themselves, or to sell those allowances to overseas companies that could use them to become more competitive against U.S. companies. Like the 1,700 Brits at Redcar, American workers would be the big losers.

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