Tuesday, March 3, 2009

g.h.kirsch: Cap or Trade

There's a disturbing pattern emerging in the current administration's approach to national problems.

Last week they proposed to saddle the citizenry with the costs of salvaging a private banking industry.

Why? Because Obama's men, who will never be weaned from the golden teat, believe a few private banks, on their knees begging for their financial lives, are better suited to manage the nation's finances than its people.

Soon, more unfortunate than the bailout of insolvent bankers who convinced us our regulation handicapped them, is the looming privatization of environmental controls in response to the popularized belief climate change is driven by human activity and only the free-marketplace can fix it.

Jeeeez! Connect the frigin dots.

The recent proposal to cap the emission of carbon dioxide and auction emission allowances promises to be the greatest creation of property rights since the 19th-century settlement of the West.

As such it represents an abdication of responsibility to protect the environment, and may lead to a crushing, regressive de facto tax on families, and the coup de grace for the poorest amongst us.

After capping, and once the right to pollute is commodified and securitized, a trading system in emissions will allow a small group to concentrate control of this new commodity to the detriment of the country.

The proposed system will likely rank as the greatest swindle by the bankrackateers since creation of the Federal Reserve System.

Frankly, get ready for speculators to drive the market for emission allowances much like they drove the housing market after the creation of mortgage based securities and oil futures during the mini oil bubble.

And unlike the earlier cap and trade program to deal with sulphur dioxide, this is an international scheme. A credit for a reduction in emissions, activities that reduce emissions, or the mere forbearance from starting to emit CO2 in Timbuktu will be traded on international markets and may then be cashed right here in Kansas, Dorothy.

Whoever sells the credit to your local energy provider will ultimately receive the additional costs on your energy bill. If you haven't connected the dots, we'll then be paying state, federal and international taxes. Who do you think will get control of these newly minted credits?

And if we ultimately discover more emission allowances, or carbon credits, have been created than the environment can support, what might we the people have to pay to redeem them to protect the very air we breath?

Where did this scheme come from?

Well, back in 1990, amendments to the Clean Air Act authorized the Environmental Protection Agency to put a cap on sulphur dioxide emissions from fossil-fueled plants in order to reduce acid rains in the US and Canada. Since that time, the program has been relatively successful in reducing acid rain. And it's also relatively easy to measure that success.

At the time, a little known company that owned and operated an interstate network of natural gas pipelines had transformed itself into a billion-dollar-a-day commodity trader, buying and selling contracts and their derivatives to deliver natural gas, electricity, bandwidth, baby clothes, whatever. They helped establish the market for, and became the major trader in, the EPA’s $20 billion-per-year sulphur dioxide cap-and-trade program. If you haven't already guessed, the company was Enron.

As Ken Lay and Jeffrey Skilling raked in the millions, the inevitable question was, what next? They realized if they could make millions trading the rights to emit sulphur dioxide, they could make billions, even trillions in a carbon dioxide cap-and-trade program?

Though “Kenny Boy” traded substantial amounts of coal, that loss of revenues was nothing compared to increased revenue from emissions trading and increased revenues from Enron's natural gas holdings, second in the world only to Gazprom. (More on the Russians later)

Their problem? Carbon dioxide is not a pollutant, and the EPA had no authority to cap its emission. Their solution? Invest in a campaign to convince the public and Congress of the threat posed by carbon dioxide produced by automobiles, electricity generation and other processes. Enron continued to vigorously lobby to get EPA regulatory authority over CO2.

But faced with the daunting task of prevailing in a congressional debate of the merits and impacts, Enron was forced to take a different tack and began to invest millions in scientific research and relations with politicians to establish the need for an international regime to manage emissions of carbon dioxide. The upshot? In 1993, enter Al Gore.

He immediately began pushing Enron's idea of an international environmental regulatory regime. Gore led a U.S. initiative to review new projects around the world and issue ‘credits’ of so many tons of annual CO2 emission reduction. And the Enron Foundation continued to lavish donations on organizations like the Nature Conservancy's Climate Change Project to popularize global warming theories and advance international energy controls to reduce “global warming.”

The plan? Once the problem was in place, the solution would be trotted out.

Enron commissioned its own internal study of global warming, and in addition, hired Christopher Horner, a lawyer who had worked for the Senate's Environment Committee, to be director of relations with the Federal Government in 1997.

The second day on the job Horner was told Enron's number one objective was to get an international treaty ratified that would impose cuts in CO2 emissions, and most importantly, allow trade in emission rights.

Enron asked the Clinton administration to help shut off scientific debate on global warming. They requested Clinton end the debate by appointing a commission to decide the matter; as if scientific questions could be settled by a majority vote. Where for art thou Galilei?

Enron's own study of global warming science turned out to be largely in agreement with the same scientists they were trying to silence.

After considering all of the inconsistencies in climate science, their report concluded: “The very real possibility is that the great climate alarm could be a false alarm. The anthropogenic warming could well be less than thought and favorably distributed.”

One of Enron’s major consultants was NASA scientist James Hansen, who subsequently published a paper in the Proceedings of the National Academy of Sciences predicting the same inconsequential amount of warming in the next 50 years, and the same as the scientists Enron hoped to gag were predicting.

Of course Enron's own findings only became public after its demise.

The long sought treaty, now known as the Kyoto Protocol, came to pass and was signed by Gore in 1998. But when the Senate took a hard look at the potential economic impact of the Kyoto proposal, by a vote of 95-0, it recommended the White House not send any treaty with such adverse impacts on the nation's economy. Clinton declined to submit it as his term ended.

In the next election, Gore was the man who would carry Enron's water. But a funny thing happened on the way to the coronation. While much has been said and written about the Florida factor in that election, Florida would have meant nothing if Gore had carried the coal producing state of West Virginia, usually a sure bet for Democrats.

But the coal industry, facing billions of dollars in new costs the anticipated trading regime entailed, rose up against him.

With his man defeated, Lay turned his efforts to the new Bush administration hoping to cut a deal to get support for ratification of Kyoto. Well the oil industry was no more enamored with new costs than coal.

Enron and other energy companies in the "Clean Power Group" (El Paso Corp., NiSource, Trigen Energy, and Calpine) would make money coming and going – from selling permits to pollute and realizing higher prices for their own energy.

If the Kyoto Protocol were ratified and in full force, experts estimated Americans would lose between $100 billion and $400 billion each year. Between 1 and 3.5 million jobs would be lost. Little wonder the incoming Bush administration did not want any part of it.

After the next election, facing four more years of Bush and no likelihood of its trading scheme's implementation, Enron's house of cards was shaking.
On July 7, 2004, Kenneth Lay was indicted by a federal grand jury for his part in an elaborate accounting scandal, and his company became one of the largest bankruptcies in history.

Fortunately for many, Ken Lay shortly succumbed, and took most of the information concerning his political investments to the grave.

And whence Al Gore? Well he took to the stump and became the leading proponent of the theory that anthropogenic carbon dioxide was driving global warming, and it was the single greatest threat facing civilization today.

While the public has largely bought the well packaged product, polite commentators and think-tank policy analysts suggest Gore has a serious conflict of interest as an advocate for action on global warming given his stake in Generation Investment Management, and myriad personal relationships with interested parties who finance his efforts. (For instance fellow environmental crusader, David de Rothschild, who backs the Earth Day extravaganzas)

Others see Gore as little more than a snake oil salesman, pitchman, shill and profiteer.

Christopher Horner, now with the Competitive Enterprise Institute, believes the government policies Gore advocated to the U.S. Senate in January 2009 "will make him and his friends extremely wealthy at the expense of consumers."

Taking a page from Enron's play-book, Gore and his friends understand if you can't convince them there's a problem, how can you sell 'em a solution.

With recent Treasury Secretary, and former Goldman Sachs CEO Hank Paulson, Gore founded Generation Investment Management in 2004. Former Goldman asset management division chief, David Blood, is GIM's managing partner.
Hence the firm is affectionately referred to as “Blood and Gore.”

David Blood, is also a prominent investor in EKO Management with Lord Jacob Rothschild.

In September 2007, Goldman Sachs invested in the Climate Exchange Plc group of companies of which both Chicago Climate Exchange, the Chicago based carbon trading exchange, and their European equivalent, are part.

So Gore and his friends have serious interest in carbon credit trading and the profits to be derived from the same. GIM operates from offices in London, where it's well positioned to collaborate with the traditional powers seeking the benefits of well crafted legislation in the US.

Chicago Climate Exchange (CCX) and the Chicago Climate Futures Exchange (CCFE) are both financed by the Rothschilds. Climate Exchange Plc employs Rothschild Inc., an affiliate of London-based N. M. Rothschild & Sons Limited, to provide investment banking services.

Clearly, GIM, Gore, Paulson, Blood, Goldman Sachs and the House of Rothschild are poised to cash in on carbon trading.

The membership of CCX is currently voluntary. But when the day comes our federal government requires CO2 emitters,
and that’s almost everyone, to participate in cap-and-trade, then those who have created the market for the exchange of carbon credits, as old “Kenny Boy” understood, will control the outcome.

And that puts Al Gore front and center.

When Enron, quintessential capitalists, went down, an unexpected replacement soon emerged; Russia. Vladimir Putin has played his hand marvelously. Coyly resisting signing the Kyoto Protocol, he managed to gain EU support for Russian entry into the WTO in return for cooperating. Then by signing Kyoto, Russia was awarded enormous carbon credits under the treaty.

Upon his rise to power after Boris Yeltsin, Putin took over a Russia that was bankrupt. The nation owed $16.6 billion to the Rothschild run International Monetary Fund, and other debts to the Rothschild controlled Paris & London Club Of Creditors exceeded $36 billion.

(All of that was of course chicken feed in comparison to the US debt owed the various branches, departments, agents, banks and fronts for the House of Rothschild.)

At the same time Putin was forced to watch the Rothschilds move with the US to control the energy resources on Russia's doorstep in the Caspian basin and the Black Sea and develop oil delivery systems through Georgia that avoided the extensive system of pipelines running through Russia.

But Putin took advantage of the boom in world oil prices and redirected the profits of Russia’s largest oil producer Gazprom to pay off the debt to the Rothschilds.

The continued surge in oil prices restored Russia's financial sovereignty. At that point Putin moved on the oligarchs who had taken control of the economy after Yeltsin's privatization of state owned enterprises, amassing huge fortunes while the country continued to flounder in poverty.

The most conspicuous target became Mikhail Khordorkovsky.

A young Khordorkovsky, with the backing of Lord Rothschild, started the Menatep Banking Group just prior to the fall of communism in 1990. The Menatep Banking Group is also associated with George Soros and the Carlyle Group.

In 1995, Khordorkovsky gained control of Yukos Oil with others and held about a quarter of its stock. He quickly became one of the world’s richest men with a personal worth of at least $1 billion. But in October of 2003 Khordorkovsky was arrested and accused of embezzlement from Yukos and defrauding shareholders.

Anticipating his arrest, in an attempt to outwit Putin, who hoped to hold Khordorkovsky's shares as collateral, Khordorkovsky quietly transferred all his shares to Rothschild. This led to Putin nationalizing Yukos and moving to drive the Rothschilds out of Russia for the first time since they financed the overthrow of the Czar and started the oil business in the fledgling Soviet Union with their new partner, John D. Rockefeller .

Yukos was absorbed by Gazprom.

Perhaps the importance of Gazprom in Putin's plans was best evidenced by his selection of Dmitry Medvedev, then Gazprom's president, as his succesor as President of Russia.
Apparently, Putin's vision, like Ken Lay's, is for Gazprom, making handsome profits selling natural gas to Europe, to now make even more from the CO2 all that gas emits.

Gazprom will next sell carbon dioxide emissions credits to EU companies so they can burn Gazprom's fuel. Gazprom's effort is part of a major push by Russia, already the world's largest exporters of oil and natural gas, to become the major player in the growing market for carbon credits. Russia possesses the credits in abundance under Kyoto and intends to benefit coming and going.

Once Putin took control of Russia's oil and gas resources, he turned his attention to the Caspian Sea basin. His intent was not to gain ownership of its energy resources, but rather to dominate the export conduits used to transport that energy to Europe and Asia.

During the Yeltsin era, Clinton had assisted US interests in developing pipelines to carry petroleum from newly-developed fields in Azerbaijan to Supsa on Georgia's Black Sea coast, where it was loaded onto tankers for delivery to international markets.

This was followed by a far more audacious scheme: the construction of the 1,000-mile BTC pipeline from Baku in Azerbaijan to Tbilisi in Georgia and then on to Turkey's Mediterranean coast.

The idea was to exclude Russia, which in the intervening years had been transformed into an increasingly impoverished former superpower, from the Caspian Sea energy rush.

Clinton made a secondary decision, to convert the new Georgian army of President Eduard Shevardnadze into a military proxy of the United States.

Putin planned a pipeline from Baku to the Russian Black Sea port of Novorossiysk. To tighten Russia's grip on European energy demand, Putin cleverly developed the circumstances that recently led to open conflict with Georgia. Russian troops marched right to Tbilisi and demonstrated to any who doubted pipelines from the Caspian basin through Georgia remained within the Russian sphere and no Georgian military force would alter that reality.

With the aid of Iran, Russia has blocked competing pipelines under the Caspian.

"Slick Willy's" gambit, initiated in the era of the bumbling Yeltsin collapsed when a bumbling Bush, mired in a senseless war for oil in Iraq, faced the likes of a Putin with little in the way of reinforcements for the Georgians besides Condy Rice.

When the man from Haliburton, the ever charismatic Dick Cheney, landed in Azerbaijan after the Georgia conflict, their president didn't even show up at the airport.

More recently Uzbekistan declined to renew agreements for US military installations in the region.

The upshot of all this has forced JNR Investment Bank (the initials stand for Jacob and son Nathan Rothschild) which is heavily invested in oil, gas and transmission pipelines in Eurasia, to make Gazprom board member, former German Chancellor Gerhard Schroeder, an adviser.

In spite of the criticism heaped on Schroeder by the West for blaming Georgia for detonating the conflict with Russia, (hello, he's on their payroll) the Rothschilds always keep their eye on the prize.

As the family chose with Rockefeller in the early 1900s, when their Royal Dutch/Shell Oil Company was locked in battle with Standard Oil, the time comes when, if you can't beat 'em, you join 'em. As they've often said, "Competition is a sin."

Meanwhile, about three weeks ago, Putin approved an agreement with Venezuela to jointly establish a bank to finance bilateral energy projects. The bank, to be chartered by Gazprombank, and Venezuela's treasury and state oil company Petroleos de Venezuela S.A., will be headquartered in Moscow.

And, of course, we can't ignore the earlier joint Venezuelan-Russian naval exercises.

Are you wondering how much more these two will drain our treasury as we are transformed into a struggling, increasingly impoverished, former superpower?

From the time he wrote his dissertation, Putin has believed it necessary for the state to control its mineral and energy reserves in order to insure its sovereignty and security.

During his career in Soviet intelligence he had to learn the Achilles heal of capitalism is greed.

On Thursday, February 26, President Hugo Chavez signed into law an amendment to Venezuela's constitution removing term limits for himself and other elected officials.

Now why have I shared all this corporate and geopolitical intrigue with you? Because I want you to understand the trade in carbon credits, or emission allowances, is a really dangerous idea.

At stake, frankly, is the fate of the nation, our sovereignty and national security. So if you think Al Gore is going to save your world, you might want to think some more.

Really big players are maneuvering to profit at an enormous expense to us, and an overwhelming cost to the poorest in the world.

Whose futures do you think will be sacrificed to create the carbon credits third world countries will trade to pay their interest to the IMF, and line the pockets of corrupt politicians?

Who will cook over a fire on the floor in a hut to keep the lights on in New York?

It really doesn't matter if you believe in global warming or not. It doesn't matter how you feel about the competing scientific claims. I am not arguing we needn't cap CO2 emissions, or that we should.

What I'm asking, if we do cap emissions, why would we set up a trading system to benefit these scoundrels?

Think about it. On one hand we cap polluters, if in fact they be, and as reasonable, allow them temporarily to continue to emit for a fee. No further increase in emissions. Slowly start reducing our emissions as necessary.

Or on the other, we give credits to people who aren't presently polluting that they transfer to others who will furnish them to emitters who can then continue to emit what some believe is changing the atmosphere and changing the climate to our detriment, though at a greater cost.

To bring it closer to home, Weyerhauser is lobbying for cap and trade. Why? Because they anticipate their forest holdings will gain them carbon credits. Does this make sense? Will their trees quit growing and absorbing atmospheric CO2? Will they stop replanting? Are they going to burn their trees and release all that CO2?

No, they'll sell their credits to some coal fired electrical generating facility for just enough less than it would cost to update that facility and keep them emitting this alleged pollutant, CO2. Or maybe they'll collect a fee from the polluter to use the right to emit. Or perhaps they'll just sell them to the Russians or the Rothschilds. It will be their property. And Weyerhauser is but one of thousands who could be awarded credits.

Trust me. When you can't build a plant that will pollute, that's all the incentive needed to build one that won't. When you can't continue to pollute, that will be all the incentive necessary to improve. If the US were to take the lead, and others didn't follow, we can deal with it. But as the biggest part of the problem, if it be, we've got a ways to go before we can start throwing stones.

The fact is, we can not ask the undeveloped world to remain in poverty so we can continue to consume the world's resources and foul its air and water.

But the last thing we need to do is give the greediest amongst us a franchise to take from us and give nothing to them.

The proposal coming forward will create a new commodity in the form of the emission allowances permitting capped industries to discharge specified amounts of carbon dioxide into the atmosphere, and their emissions above that will force them to purchase credits. Governments and agencies throughout the world may vest rights to emit through the issuance of credits. Those who succeed in acquiring and controlling the credits become the new taxman.

We the people need to control the right to emit, not the private sector. These rights, if granted, should not be transferable. It should instead be a license we receive revenue from and will eventually expire. And above all, if we do this, US industries should only be allowed to purchase credits from the US government. Let the price be set each year by auction as the cap is lowered to a level real science demonstrates is necessary.

Otherwise, in the end, the hyper wealthy will tax industry as much as the market will bear. A commodity, worth hundreds of billions of dollars today, created and controlled by the very people who have long been promoting this plan, will, ultimately, be priceless.

The Obama administration is proposing to auction off the right to collect revenue from alleged polluters apparently forever. All the country will get in return is some 500 to 700 billion dollars. That won't even fix the frigin banks. Jeeez! Don't they get it? This is the gift that will just keep on giving.

Even if they set the cap on emissions at something substantially less than their present levels, when the emitters purchase the necessary allowances from those granted the credits, who will shoulder the costs? Right, you and me, ratepayers for electricity and the consumers of industry's output. And can you imagine how the creation of credits will be gamed? It's just like printing money.

I can accept the tax if the environment really requires it. The tax is coming, and one way or another we will pay it. But why are we going to direct the money to profit this bunch of scoundrels?

And unlike monitoring acid rain in the great lakes, who is going to measure the successfulness of an international program to reduce anthropogenic CO2 emissions on a global scale and determine what part of the total content is not occurring naturally?

The potential for this to turn into a boondoggle is enormous.

Instead of creating property for the private sector to trade and control, why not just measure emissions at their point of production, tax the emitters for emissions above a certain level each year, and direct the proceeds into a fund to be lent to actually reduce CO2 emissions if they're such a problem?

But that's not what this is really all about is it. It's not about the environment. It's not even about money or energy. It's all about power.

The whole thing is so reminiscent of the bankrakateers privatization of money and credit. And look where that's got us.

The KGB element is a foreboding twist.
contact: editor.norwestreview@gmail.com