California counting its carbon tax riches

May 29, 2012

By Katy Grimes

While the rest of the country shuns carbon trading schemes, California politicians continue to embrace the concept, and are forging ahead with a Cap and Trade carbon trading system. But eight states have dropped out of California’s Western Climate Initiative, leaving many scratching their heads in wonderment, as only California and Quebec are left alone to solve the world’s global warming and climate change issues.

But instead of being a real innovator and helping businesses sincerely lower emissions, California looks as if it is desperately clinging onto the notion that we can lead the rest of the world in controlling climate change, and behaving as a Nation State.

Why Quebec?

Cap and Trade was first concocted by the United Nations as a way to financially benefit from selling carbon offset credits. Vice-President Al Gore was already part of the Intergovernmental Panel on Climate Change, which helped seal the deal in the 1990’s through the Clinton administration’s involvement in the Kyoto Protocol, which mandated that nations reduce or offset carbon emissions.

This scheme must have been irresistible to the California Legislature, which passed AB 32, California’s Global Warming Solutions Act, in 2006. The original plan was to create a giant climate change coalition with other states and provinces from which carbon trading and taxing would emanate. But one by one, states have dropped out, citing the difficult economy and cost to manage such a program.

But not California.

“Linking with Québec is a significant advance in California’s efforts to fight climate change and steer our economy toward a clean energy future,” said CARB Chairman Mary D. Nichols. “Linking provides more options to California businesses and lays the groundwork for other partners to join with us. This sends a strong message to two national governments that now is the time to support innovation, energy efficiency and the development of clean technologies.”

But Quebec is not even a trading partner with California.

Counting the chickens before they are hatched

As part of his 2012-13 state budget, Gov. Jerry Brown made a gigantic assumption that the state will see $1 billion in cap-and-trade revenue. The state Legislative Analyst’s Office warned that this is a dangerous budget gimmick and an unstable calculation.

The California Air Resources Board passed cap-and-trade regulations in 2011 as part of its effort to implement AB 32. The air resources agency was granted authority by AB 32 to develop “market mechanisms” to reduce emissions to 1990 levels by 2020.

To achieve this, CARB developed its Cap and Trade program, and named 300 industries as the polluters, which will be required to buy carbon credits from the state in order to continue doing business in California.

When more closely examined, Cap and Trade appears to be a wealth redistribution program, by imposing a carbon tax on mostly private businesses, as well as utilities. Economists have warned that it will send businesses in California packing for other states.

While CARB continues to insist that Cap and Trade programs have been a smashing success, programs in Europe and the Northeast have failed, resulting in business closures and downsizes, and fewer tax revenues. Spain nearly went bankrupt with its green energy programs, by killing more jobs than it created. Many warn that Cap and Trade has failed every time it has been implemented, especially in the European Union and Japan.

But CARB will have to rely on companies to honestly report their emissions, which undoubtedly will lead to gaming the system, and cheating.

At a recent Assembly hearing on Cap and Trade, Assemblyman Brian Jones tried to put CARB’s role into perspective. But his objections were met with steely resistance from Assembly Democrats.  “It is my perception since I’ve been elected and serving here for 14 months that CARB is a rogue agency” Jones said. “I want to reaffirm and state emphatically that CARB’s authority derives from this Legislature. It doesn’t derive on its own.”

“Your commissioners are not elected by the public or the voters of this state. We are elected by the voters of this state,” Jones continued. “And this Legislature has given over to CARB some authority that I believe CARB has run away with, and I am only hopeful that my colleagues in this committee and the rest of this Legislature will also come to the same conclusion that I’ve come to and soon realize that the authority of CARB comes from this Legislature, and we will start to rein that in and protect the voters and the public interest in this state.”

Global warming and political influence

In February, China ordered its airlines to ignore the 2008 European Union law which imposed a carbon emission tax on all flights traveling to and from the EU.

Moving in opposite directions, China continues to build coal plants, while California continues to enforce strict regulations to limit traditional forms of energy production, and encourage solar, wind along with other environmentally friendly alternatives.

Recent political history helps us understand how Cap and Trade works, and the political influence derived from its programs.

The now-defunct Chicago Climate Exchange, was founded by Chicago Board of Trade chief economist Richard Sandor, former Goldman Sachs & Co. CEO Hank Paulson, and former Vice President Al Gore, and started trading in 2003. The CCX received start-up funding from the Joyce Foundation in 2000 and 2001, during which time then-Senator Barack Obama sat on the board of directors.

The CCX had more than 400 members, which included corporate giants, auto manufacturers, universities, large utilities, and even Amtrack.

The CCX was estimated to make $10 trillion a year, and explains why California politicians continue to pledge support for California’s carbon trading program. But the CCX was closed down because the voluntary participation of its members waned as other carbon registries entered the market. The Climate Action Reserve and American Carbon Registry continue to operate.

Cap and Trade revenue hearing

CARB’s Board of Directors held a hearing last week to discuss the anticipated revenues from upcoming Cap and Trade auctions, and how they planned to spend the windfall monies.

“We are looking for synergy and consensus,” CARB Chairwoman Mary Nichols said at the hearing. Nichols said that in the transportation sector, efforts to capture the synergies have been successful, “which will help to make our state more competitive.”

Nichols reported that CARB does not know how much money will come in from carbon trading auctions, but the CARB Board estimates “several billion dollars each year.”

CARB invited two panels to participate in the hearing, made up of mostly environmentalist stakeholders, with the exception of the California Manufacturers and Technology Association, the lone voice for business.

Assemblywoman Diane Harkey, R-Dana Point, expressed her concerns at the hearing about how the Cap and Trade program will work, and whether the program will actually result in lower greenhouse gas emissions, as mandated by AB 32. Harkey suggested that it may just be a scheme to allow vast sums of money to change hands, with investors eventually getting rich off of market speculation, and with no improvement in the reduction of emissions.

Harkey warned that CARB was entering the sophisticated financial world of derivative markets and hedge derivatives, where investors get involved in betting, trading and profiting on the value of carbon credit shares. She warned that such sophisticated financial dealings should be managed by specialists, and not a state agency tasked with a mission of cleaner air.

Ignoring all warnings

Two years ago, the Christian Science Monitor published a joint investigation with the New England Center for Investigative Reporting, which found that existing carbon trading schemes were just another way to make money. “Carbon offsets are nothing more than the environmental equivalent of financial derivatives: complex, unregulated, unchecked and – in many cases – not worth their price,” the investigation reported.

“They are buying into projects that are never completed, or paying for ones that would have been done anyhow,” the investigation found. “Their purchases are feeding middlemen and promoters seeking profits from green schemes that range from selling protection for existing trees to the promise of planting new ones that never thrive. In some cases, the offsets have consequences that their purchasers never foresaw, such as erecting windmills that force poor people off their farms.”

Instead of heeding the many warnings, California is moving ahead at rapid speed to implement the first Cap and Trade auction in November.

As with most schemes, the catch is in the amount of empathy and guilt the con artist can elicit. Buying carbon offsets may ease eco-guilt, but experts have concluded that it will do absolutely nothing to lower the world’s carbon emissions, particularly as California goes it alone.

16 comments

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  1. Bob
    Bob 29 May, 2012, 15:56

    This takes effect Jan 1, right?

    Is there any way to get a ball park figure on how much this will cost us?

    I know refineries will be hit hard and we already have the highest priced gasoline in the country.

    My understanding is that businesses from oil refineries to bakeries will have to pay for these carbon credits and they are sure to pass at least some of the cost on to the consumer.

    Reply this comment
  2. CalWatchdog
    CalWatchdog Author 29 May, 2012, 16:12

    There are estimates of at least $1 billion. What each Californian stands to pay is unknown at this time, but we are already seeing increases in our utility bills in anticipation of Cap and Trade.

    If California needs one more firm push to finally hit rock bottom, this could do it.

    Katy

    Reply this comment
    • Steve
      Steve 17 August, 2017, 10:57

      More specifically, how much of my horrendous PG&E bill is the result of their requirement to purchase carbon credits? My monthly bill has risen over 200% over the past 5 years.

      Reply this comment
  3. Tom_in_Ohio
    Tom_in_Ohio 29 May, 2012, 17:18

    Lets face it, a lot of businesses are running on razor-thin margins so it is hard to “abosrb” taxes, and why should they anyway ?
    There is no such thing as a “business tax’ all the costs get passed to the consumer or the product cheapened in some way to make up for the costs
    one plus one ALWAYS makes two, it can not be less than two or more than two.
    Again, all costs of production are passed on to the eventual consumer in some form or another.

    Reply this comment
  4. Rob
    Rob 29 May, 2012, 21:58

    Welcome to the self made third world nation. The global warming hoax has always been about money and power, which created a lot of hot air, thus global warming! LOL at least we can all move…

    Reply this comment
  5. Dave Boz
    Dave Boz 30 May, 2012, 07:12

    Driving manufacturing and extractive industries out of California has long been a primary goal of the governing class in that state. California wants to live on three industries: entertainment, software, and government. It’s willing to import everything else from the ‘dirty’ places that it hopes will continue to exist elsewhere. California has a puffed-up sense of self-importance, but it represents only a very small part of the world economy. It is lucky to be small enough that the damage from it’s policies will mostly be felt by California’s own citizens.

    Reply this comment
  6. Bill
    Bill 30 May, 2012, 20:57

    A great resource that lays out the “Agenda”:

    Understanding Sustainable Development – Agenda 21: For the People and their Public Officials

    Pamphlet link – http://www.freedomadvocates.org/images/pdf/SD%20A21%20pamphlet-2010.pdf

    (Prepared by FREEDOM ADVOCATES: Recognize Unalienable Rights / http://www.FreedomAdvocates.org)

    Reply this comment
  7. Ronald Stein
    Ronald Stein 31 May, 2012, 09:18

    CARB’s Fuels Policies are Throwing California’s Economy Under the Bus

    In the last 20 years, Southern California’s population has doubled, but the air quality has gotten BETTER, not worse. New rules by government bureaucrats, however, are coming into play that will increase the costs of electricity, gasoline, roads, homes, services, you name it, for literally no significant betterment of air quality.

    Californians already pay among already the steepest prices in the nation for gasoline. A good deal of this is due to the state’s mandatory unique gasoline formula and combined taxes at the pump which are the country’s second highest.

    Cap and Trade, a cornerstone of AB 32, the California Global Warming Solutions Act. Projections place the cost of cap and trade at anywhere from 50 cents to one dollar per gallon added to the retail price of gasoline here just for the 37 million in CA, for a go-it-alone State that contributes less than 1% of the GHG’s being emitted into the worlds atmosphere, and billions in increased general energy costs.

    Under cover of AB 32, CARB is forcing billions of dollars in higher costs on our struggling economy to reduce greenhouse gas emissions associated with global warming.

    The problem is that California and its 37 million citizens contribute less than 1% of the world’s greenhouse gases. Solving a world GHG problem is not the responsibility of the few that live in California. Maybe China and India with 2.4 BILLION contributors may be, but not California’s 37 million.

    CARB touts California’s “leadership” in the war on climate change. The “leadership” premise is similar to crossing the street within the confines of the crosswalk and getting hit by a bus – you’re right, but “DEAD RIGHT!”

    Those who feel that spending billions to reduce greenhouse gases in a State that contributes less than 1% of the world’s GHG’s may be right, but they are dead right as it accelerates the exodus of businesses and jobs from California, and an unemployment rate that consistently remains among the highest in the country.

    With California transportation fuels already among the country’s most expensive and our gas taxes the second highest in the USA, it’s impossible to justify the imposition of billions in higher fuel costs just to retain the title of “leader” in greenhouse gas reductions.

    CARB would do well to get out of the crosswalk and stop throwing California’s economy further under the bus.

    Reply this comment
  8. Bill
    Bill 31 May, 2012, 18:18

    And we’re talking the mother of all tax/fee increases under AB32–not to mention direct restrictions on Life, Liberty and the pursuit of Happiness…. The costs are inconsequential to these people. The true aim is to pack you into urban hovels and keep the sheepled masses out of “Wilderness Areas” via designated corridors and “human habitats.” It’s all a bit Orwellian, but nonetheless true.

    Didn’t Californians read 1984 in school…where’s the outrage?

    Reply this comment
  9. Mitch Davis
    Mitch Davis 24 June, 2012, 22:54

    It is another unfair tax on Californians. Who voted for the law? politicians and not the citizens of california. When the tax hits it will be met with resistance because of the crappy economy we are already in.

    Reply this comment
  10. David Travers
    David Travers 3 July, 2012, 22:28

    Lets be clear, carbon trading is an Enron created idea and just like their idea of trading broadband its just plain stupid. The oil companies should close every refinery in the state for a few years and then lets see what happens to the CARB fools.

    The earth warms and cools cyclically. CARB did some good for a while but like every government agency they have grasped for more than they can handle. They have gone to far and they need to be disbanded.

    Reply this comment
  11. Paul goldstein
    Paul goldstein 18 April, 2013, 20:47

    Why don’t we just approach this in a sane and rational way. It says above that AB32 is a gem of the Ca. Legislature….so what would be the best way to fix it. How about not voting for these idiot democrats who have absolutely ruined this state with their ” we don’t want anything dirty in this state” attitude. 2016 is approaching and we need to send these fools a message…either do what’s good for the people of this state or you will be replaced. In the meantime a few hundred thousand letters to your legislature will at least make them think. In the meantime at least get rid of the most destructive of them…FIRE MARY NICHOLS!!!!!

    Reply this comment
  12. warren duffy
    warren duffy 16 May, 2013, 12:47

    You need a view from an orbiting satelite in outer space to follow all of the players in this astounding scheme that Katy has uncovered. CARB pays money to WCI to provide administrative and oversight services for the cap and trade auctions. CARB says they actually conduct the auctions, like Mary Nichols understands the derivatives market, right?

    WCI’s latest 990 tax form shows assets of $1.7-million, most of it comes from CARB, some from Quebec. WCI in turn hired a Virginia IT firm at a cost of $600,000 to provide help desk services and administrative oversight. (I suppose nobody in Silicon Valley could have figured out how to do the job).

    Mary Nichols is the new Treasurer of the WCI, in addition to heading CARB. The chairman of the board, is the head of CAL EPA, Matt Rodriguez. Don’t see any conflict of interest there, do you?

    We’re still operating all of these boondoggles under the 2006 CA Global Warming Solutions Act created by that scientific genius, Fabio Nunez. The GWSA is solving a problem that everyone now admits, we don’t have. The globe ain’t warming.

    CO-2 emissions have skyrocketed – the planet is cooling – scientists are mystified – us deniers are chuckling.

    As Reagan told us, “Government is never the solution to a problem, government is the problem.”

    Heavy-handed, ruthless, vindictive and hard-hearted government has run our state and our country into the ground. We can observe it best in DC as we deal with infringement on the rights of a free press, the politicos who could never trust us peons with the truth about Benghazi so they made up an election season fairy tale, an arrogant AG who wouldn’t prosecute jack-booted thugs outside an election site in Philadelphia, never explained the deadly Fast and Furious scandal and doesn’t seem to know anything about birthin’ babies or his Cinncinati IRS thugs browbeating pro lifers, Billy and Franklyn Graham, Tea Party folks, Patriot organizations and probably Cal Watchdog, too.

    One Party rule in Sacto has been just as bad. We the people voted for a law, the attorney general decided not to enforce it and wouldn’t defend the will of the people in a court of law. We have a governor who needs to go back to the home and get back on his meds, piggies pushing to see who can be first at the feeding trough under the capital dome, a silly school system run by union bosses, prisons run by other union bosses, environmentalism run by biased bureaucrats, and a state budget that only a payday-cash-advance store would love.

    Forgive my cynacism but CARB is a joke, so is WCI, so is the Capitol and so are the guys in the silk suits who went to DC from Chicago and seem to be running the place.

    Down here in Southern California, we’re considering a secessionist movement. Anyone interested?

    Reply this comment
  13. Del
    Del 13 September, 2014, 19:31

    Aw, this was a very good post. Spending some time and actual
    effort to make a superb article… but what can I say…
    I put things off a lot and never seem to get nearly anything done.

    Reply this comment
  14. RattyRat
    RattyRat 23 January, 2015, 19:55

    Problem/Reaction/Solution. They already got the Solution so they create the problem to get the reaction to implement the solution. Its as old as the serpent.

    Reply this comment

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