Is Cap and Trade a much larger Enron scam?

Sept. 13, 2012

By Warren Duffy

It happened again.

First, earlier this year the California Independent System Operator reported to the Federal Energy Regulatory Commission suspicion that J.P. Morgan Chase was guilty of a plot to keep electric power off the California consumer market until it was able to command “exceptionally high prices.” The amount grabbed was $73 million. The ISO oversees California’s electricity market.

J.P. Morgan Chase’s name became public when FERC sued it in U.S. District Court for access to internal emails. J.P. Morgan denies the charge.

Now, another company has done the same thing. So far, the company name has not been revealed. Reported the Sacramento Bee, “The company, which state officials wouldn’t identify, has allegedly reaped $10.5 million in ‘excessive gains’ since April.” There has been no court filing against the second claim, so the name of the alleged company remains a mystery.

Are market speculators circling the California Cap and Trade waters preparing to repeat the gaming of the California electric system as they did in 2000 and 2001? For those who may have forgotten, it was Texas company Enron that drove electric prices to record highs, causing massive blackouts for California consumers, while billions of dollars were made in excess profits. Enron went bankrupt and some of its executives went to prison.

What does all of that have to do with California Cap and Trade?

The California Air Resources Board is poised to being its Cap and Trade carbon-credit auction in the state on November 14. At least 400 California manufacturers, utilities and energy producers will be participating.  These are businesses in transportation, construction, food processing, concrete, refineries and even colleges.

They will be required to purchase carbon credits to cover the excess over their pollution “caps.”  The fear among many people is this will open the Cap and Trade market to all sorts of sophisticated players who know all too well how to “game the system” at the cost of more than just electricity.

At the end of August, CARB conducted a “dry run carbon credit auction” with approximately 150 non-disclosed participants.  What happened during that 3-hour exercise remains a closely guarded secret.

What little we do know came from CARB spokesman, David Clegman, who admitted attempts by unidentified players to test the boundaries of the market. Some bids offered by so-called carbon purchasers were described as “completely screwy,” exceeding price limits designed to prevent any cornering of the market. And yet, CARB insists they have safeguards in place to protect their carbon credit auctions from market manipulators.

Since CARB cannot sell carbon credits, it has set up the Western Climate Initiative to oversee all transactions. Having incorporated as a Delaware Corporation , WCI is free from open-meeting disclosures required under California law. If CARB is adamant about protective measures in place, why would they not insist on open-meeting disclosures?

Is the wolf guarding the hen house?


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  1. Edward Steele, Chief Investigator
    Edward Steele, Chief Investigator 13 September, 2012, 12:56

    Cap and Trade— the darling of the R Reagan nursery.

    Reply this comment
  2. Paul
    Paul 13 September, 2012, 14:16

    Cap and trade is a scam no matter how you spin it! Plain and simple

    Reply this comment
  3. Wayne Lusvardi
    Wayne Lusvardi 13 September, 2012, 15:44

    The California Air Resources Board (CARB) has been testing their trading model for some time. Even if it can prevent so-called Enron type abuses of gaming the trading system, the much bigger problem is GOVERNMENT GAMING of the Cap and Trade system. As I wrote in my May 18 article “Cap and Trade Won’t Cure California’s Budget Deficit”

    “The California Air Resources Boardhas been spending a lot of money on retaining consultants and monitors to prevent the gaming of the Cap and Trade auctions by third-party speculative traders. But it may not be traders that would be of the most concern if the activities that can be funded under Cap and Trade are expanded beyond reducing pollution.

    The California Public Utilities Commission and CARB have estimated that the proceeds from Cap and Trade auctions could total $50 billion from 2012 to 2020. But Robert Lucas, a consultant with the California Council for Environmental and Economic Balance, is quoted in that if pollution allowances are held in reserve by CARB for any year, the unit price per ton of reduced carbon pollution could spike to $40 or $50 per ton. Lucas said, “we could be talking about $100 billion between now and 2020.”

    This would provide a perverse incentive for CARB to intentionally withhold pollution allowances to generate revenues for greedy bureaucratic agencies seeking to perpetuate themselves with Cap and Trade revenues. California could see a return to skyrocketing electricity prices, as experienced in the 2000-01 Electricity Crisis. And where would the check and balance be for voters and electricity ratepayers if the only referees to appeal to have a stake in the system?

    If Cap and Trade were allowed to directly or indirectly plug the state operating fund budget deficit, gaming bureaucrats could hide behind a “veil of the carbon market” to jack up electricity rates and inflate the price of nearly all goods.”

    Reply this comment
  4. Queeg
    Queeg 13 September, 2012, 16:47

    The so called scam is from your Austrian socialist gov.

    Grow some trees, apply for carb credits and move on….

    Reply this comment
  5. Bob
    Bob 13 September, 2012, 17:58

    Just follow the money and anyone should be able to figure out this is a huge scam.

    Banksters like Goldman Suchs and Algore’s carbon credits trading firm stand to make billions and gummits much more. And how big is Algore’s carbon foot print? With his mansions and his jets now how big do you think it is?

    And who pays? The little people.

    But the idiot sheeple in Caulifornia voted twice for this criminal activity.

    They wanted it and they’re gonna get it good and hard!

    Reply this comment
  6. Rex the Wonder Dog!
    Rex the Wonder Dog! 13 September, 2012, 20:01

    Cap and Trade— the darling of the R Reagan nursery.
    More whopper lies…go back ot Burger King if you want to sell those whoppers.

    Reply this comment
  7. Rex the Wonder Dog!
    Rex the Wonder Dog! 13 September, 2012, 20:01

    cap n scam is a rip off.

    Reply this comment
  8. Ted Steele, The Decider
    Ted Steele, The Decider 13 September, 2012, 20:10

    The Reagan White House conceived the first cap-and-trade program to reduce pollution, used in the 1980s to phase out lead in gasoline at a lower cost. It was developed as a more flexible, market-based system to reduce environmental pollution compared to the so-called “command and control” model employed by environmental laws in the 1970s. The old system required each polluting facility to make a fixed reduction in air or water contamination, which ignored that some facilities could cut pollution more cheaply than others. An EPA analysis shows:
    … estimated savings from the lead trading program of approximately 20 percent over alternative programs that did not provide for lead banking, a cost savings of about $250 million per year.
    President Reagan also signed the Montreal Protocol in 1987 to slash the production and use of chemicals that deplete the upper ozone layer essential to screen out cancer-causing ultraviolet rays. His administration established a cap-and-trade system to implement the chemical reductions the protocol required. A 2006 scientific assessment concluded that “the Montreal Protocol is working” to reduce chemicals and protect the ozone layer.
    President George H.W. Bush, Reagan’s successor, was the first president to propose the employment of a cap-and-trade system in an environmental law. The Clean Air Act of 1990 includes his proposed cap-and-trade system to reduce the sulfur pollution from power plants responsible for acid rain.
    The Clean Air Act passed the Senate by a vote of 89-10 and the House by 401-25. Many staunch conservatives voted for it including Sens. Kit Bond (R-Mo), Trent Lott (R-MS), Mitch McConnell (R-KY), and Strom Thurmond (R-SC). Conservative House supporters included Reps. Newt Gingrich (R-GA), Joe Barton (R-TX), Dennis Hastert (R-IL), Jim Inhofe (R-OK), and Fred Upton (R-MI).
    When President Bush signed the Clean Air Act into law he highlighted its innovative cap-and-trade mechanism:
    The acid rain allowance trading program will be the first large-scale regulatory use of market incentives and is already being seen as a model for regulatory reform efforts here and abroad.
    “To reject this legacy and embrace the failed 1970s policies of one-size-fits-all regulatory mandates would signify unilateral surrender of principled support for markets,” write economists Richard Schmalensee, who worked in the Reagan White House, and Robert Stavins. “If some conservatives oppose energy or climate policies because of disagreement about the threat of climate change or the costs of those policies, so be it. But in the process of debating risks and costs, there should be no tarnishing of market-based policy instruments. Such a scorched-earth approach will come back to haunt when future environmental policies will not be able to use the power of the marketplace to reduce business costs.”
    Schmalensee and Stavins’s warning should be heeded: This current crop of Republican and a few Democratic officials—in their zeal to curry favor with their special interest funders and Tea Party activists—could doom future efforts to follow the path paved by Presidents Reagan, Bush, and Bush to reduce pollution in the most cost-effective way possible.

    Reply this comment
  9. Ted Steele, The Decider
    Ted Steele, The Decider 13 September, 2012, 20:12

    Looks like Poodle may actually be 0 for 10 at this time due to his denial of Pres Raygun and his cap and trade dream….

    0 for 10 baby ™

    the poodle just makes this stuff easy!

    Reply this comment
  10. Rex the Wonder Dog!
    Rex the Wonder Dog! 13 September, 2012, 20:32

    12-0 since you lost that whopper about raygun!
    BAM 🙂

    Reply this comment
  11. BobA
    BobA 13 September, 2012, 21:23

    Wayne Lusvardi:

    I tend to think that utility rates are going up regardless and that’s just the beginning of this state’s woes. I once thought that California was on track to become a mostly agricultural state with maybe 2 or 3 big cities but I’ve come to realize that I was wrong.

    The ultimate goal of the environmentalists, in my opinion, is to depopulate the state of California and turn it into a vast wilderness with private compounds for the rich & wealthy and their guests.

    Cap & trade is part & parcel part of an elaborate and nefarious scheme to drive up costs across the board so as to make it untenable for anyone but the wealthiest people to live in the state of California. All those who are not rich and wealthy will have no choice but to seek refuge in other states.

    Reply this comment
  12. Paul
    Paul 13 September, 2012, 21:23

    Anything that has to do with global warming is a scam, cap and trade, carbon credits and so on. It’s called Natural Climate Change….Plain and simple…..It’s all about the money and power.

    Reply this comment
  13. Rex the Wonder Dog!
    Rex the Wonder Dog! 13 September, 2012, 23:15

    It’s called Natural Climate Change….Plain and simple…..It’s all about the money and power.
    well said

    Reply this comment
  14. Ted Steele, The Decider
    Ted Steele, The Decider 14 September, 2012, 06:48

    Sorry little buddy! You’re 0 for 10 ! ™

    What Would Reagan Do
    About Climate Change?

    By David Jenkins
    The climate change skeptics who populate our radio and television airwaves, such as Rush Limbaugh and Glenn Beck, like to claim that their views match those of the late President Ronald Reagan. In doing so, they leave their audiences with the impression that Reagan would share their skepticism about climate change and oppose action to reduce greenhouse gas emissions — an impression that liberals are equally happy to perpetuate.

    Of course, their saying so does not make it true.

    In reality, the howlers on talk radio and Fox News are less interested in following Reagan’s lead than they are in remaking him in their own image. Reagan is not their compass, but rather a cloak they wrap themselves in for credibility.

    That is why you will never hear Limbaugh or Beck mention—much less praise—any of Reagan’s environmental accomplishments. His conservation record and his stewardship ethic do not project an image of Reagan that fits with their ideological agenda. So they ignore that aspect of Reagan’s conservatism—as do liberals, albeit for different reasons.

    If Reagan were alive and serving as president today, no one could know exactly what he would do about a problem that was only beginning to be recognized during his administration, but we can glean clues based on a careful examination of his record.

    Fortunately, we have an example from his presidency that is quite revealing in the context of the current climate change debate. Extremists on both the left and on the right might be surprised.

    The Real “Ozone Man”

    In 1984, researchers confirmed a hypothesis that chlorofluorocarbons (CFCs) used in aerosol sprays and refrigeration equipment were depleting the earth’s protective ozone layer.

    They concluded that unless ozone-depleting chemicals were phased out, life on earth would be exposed to ever-increasing levels of dangerous ultraviolet radiation emitted by the sun.

    These findings met with much the same kind of skepticism and resistance that have greeted scientific conclusions about climate change—and from many of the same sources. Limbaugh, for example, has been a longstanding cynic regarding both ozone depletion and climate change. He dismisses each problem as a “hoax” and has made ridiculing them a staple of his act.

    Reagan, when faced with mounting scientific concern about ozone depletion, listened to all sides, carefully weighed the facts, and ultimately sided with the climate scientists who were urging him to take prudent action to safeguard our atmosphere.

    Despite strong opposition from Interior Secretary Don Hodel and other skeptics within his administration, President Reagan chose to push through a strong international treaty to begin phasing out ozone-depleting chemicals.

    That 1987 treaty, the Montreal Protocol, is widely regarded as the most successful environmental treaty of all time.

    A few months before the final negotiating session the United States’ chief negotiator for the treaty, Richard Benedick, was concerned that Hodel and others would convince Reagan to back off the U.S. position, which demanded significant near-term CFC reductions.

    In a 2007 article entitled, Science, Diplomacy, and the Montreal Protocol, Benedick describes how he learned of the president’s decision:

    In June 1987, with the final negotiating session at Montreal less than three months away, I was at the Reichstag in Berlin to deliver an address on the fortieth anniversary of the Marshall Plan when a breathless U.S. Embassy attaché brought me an “Eyes Only” personal cable from the White House. President Reagan thus became the world’s first head of state to personally approve a national negotiating policy on ozone protection. Ignoring the advice of some of his closest political friends, the President completely endorsed, point-by-point, the strong position of the State Department and EPA.

    President Reagan decided to protect our atmosphere from a problem that, at the time, was not fully understood by scientists. He discounted the arguments of those who claimed that the problem was not real or that the economic cost would be too great.

    Today, because of his bold leadership, our ozone layer is healing.

    In the 2000 presidential race, former Vice President Al Gore was mocked by George W. Bush supporters with the label “Ozone Man.” Little did they know that the real “Ozone Man” is not Gore. It is Ronald Reagan.

    Cap and Tirade

    Turn on talk radio and you are likely to hear rant after rant about the evils of cap-and-trade legislation. Cap and trade is the common name for a market-based pollution control policy that sets caps on emissions and allows companies to buy and sell emission allowances.

    By establishing a limited market for these tradable allowances, a cap-and-trade program puts a price on harmful emissions and provides the companies a financial incentive to reduce emissions. Companies that find effective ways of cutting their emissions can sell their unused allowances to companies that are still exceeding the cap level.

    Under the traditional “command-and-control” approach to pollution reduction, the Environmental Protection Agency (EPA) would not only set pollution limits, it would also prescribe the technology companies were required to implement to achieve those reductions.

    It would probably come as quite a shock to Limbaugh and Beck, not to mention the tea party crowd and some GOP leaders, that the cap-and-trade method has a conservative lineage that can be traced back to the Reagan White House.

    During Reagan’s presidency, acid rain was a huge environmental problem. In addition to committing funds for research and emissions control projects, Reagan asked his Presidential Task Force on Regulatory Relief—chaired by then Vice President George H.W. Bush— to examine incentives for the deployment of emissions control technologies and identify new opportunities to address the problem.

    C. Boyden Gray, counsel for both Vice President Bush and the task force, became attracted to the idea of emissions trading as a market-friendly alternative to the “command-and-control” approach typically favored by bureaucrats.

    President Reagan seemed to allude to this in his 1987 State of the Union address, saying:

    We are also developing proposals that make use of market incentives to control air pollution caused by sulfur dioxide and nitrogen oxide emissions and the causes of acid rain.

    Reagan left the White House before the idea could be implemented, but Gray continued to work on the idea, and in 1990, the first Bush Administration successfully pushed through legislation establishing a cap-and-trade program to reduce acid rain. Cap and trade was a great success, reducing sulfur dioxide emissions faster and at a much lower cost than had been anticipated.

    Reply this comment
  15. Ted Steele, The Decider
    Ted Steele, The Decider 14 September, 2012, 06:48

    LOL— Conservatives forget the TOMS program!!!

    (and, well, alot of things…)

    Reply this comment
  16. Donkey
    Donkey 14 September, 2012, 07:38

    Just another liberal control grab the RAGWUS is proud of creating. 🙂

    Reply this comment
  17. BobA
    BobA 14 September, 2012, 08:35

    Ted Steele:

    In case you haven’t heard, Ronald Reagan was president from 1981 to 1987 and he died in 2004. It’s now the year 2012 and the world has change since then.

    What would Reagan would do? Don’t know; he’s dead. What I’d like to know is: which part of a chicken is the nuggets?

    And one more thing (you may want to brace yourself for this)………..Disco is dead!!

    Reply this comment
  18. Rex the Wonder Dog!
    Rex the Wonder Dog! 14 September, 2012, 09:33

    LOL..Sorry teddy, I dont have 5 days to read your copy and paste propaganda… 🙂

    Cliff notes version buddy!

    Reply this comment
  19. Rex the Wonder Dog!
    Rex the Wonder Dog! 14 September, 2012, 09:34

    And one more thing (you may want to brace yourself for this)………..Disco is dead!! just destroyed Teddys world!

    Reply this comment
  20. Edward Steele, Chief Investigator
    Edward Steele, Chief Investigator 14 September, 2012, 10:19

    lol— Poodle uses Cliff Notes ™— That explains alot!

    LOL 0 for 10 ™

    Reply this comment
  21. Mark in Commiefornia
    Mark in Commiefornia 14 September, 2012, 10:45

    Correct me if I’m wrong but I seem to remember that when Ab32 was on the ballot there was talk and claims that touted utility users were to get refunds to offset increases in their bills……. Well I guess thats out the window now. It certainly is interesting watching this once great state self destruct itself.

    Reply this comment
  22. Queeg
    Queeg 14 September, 2012, 14:52

    Tdddy shun him….readers are tired of senseless nonsense….

    There are tons of intelligent fanatics on CWD to debate!

    Reply this comment
  23. Paul
    Paul 14 September, 2012, 14:53

    It’s all about control and power! UN agenda 21 and liberals want a piece of the pie! Part of the pie is the UN’s worthless IPCC (carbon credits). If you know anything about the UN the hasn’t fixed anything except their bank accounts with OPM (other peoples money). Much like California is trying to do and our worthless so called president……

    Reply this comment
  24. Queeg
    Queeg 14 September, 2012, 23:29

    Paul take a breath and make some money….you’ll need it for taxes.

    Reply this comment
  25. Paul
    Paul 15 September, 2012, 00:05

    We owe no one! Everything is paid for! FACT! No Credit card debt, No mortgage, No auto loans, NO NOTHING, DEBT FREE as of last month! I can breath! Can you? I own everything I have! Do you? Now it’s about surviving Obama, Brown, liberals and the UN.

    Reply this comment
  26. Queeg
    Queeg 15 September, 2012, 14:44

    That is commendable….good job.

    When inflation comes cash may be worthless and assets an inflation hedge. Your positioned for greater things.

    By comparison…..a retiree hangs on in California….one Sacramento vote and we will be extinct as the animals on cave paintings!

    Reply this comment
  27. Ted Steele, The Decider
    Ted Steele, The Decider 16 September, 2012, 09:15

    Good job Paul— I own it all as well– THAT is the key to retirement!

    But surviving the UN and the Pres isn’t enough.

    If the gov ever releases the aliens from Roswell or tells the truth about building 7, we are all doomed!

    Ted The Protector

    Reply this comment
  28. Rex the Wonder Dog!
    Rex the Wonder Dog! 16 September, 2012, 09:41

    Teddy, ANYONE can own a trailer and 1982 P/U truck lil buddy 😉

    Reply this comment

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