First Cap and Trade auction cuts no pollution for $233 million

Nov. 21, 2012

By Wayne Lusvardi

In the private sector, success is often likened to “selling lemonade at a track meet.” But in the upside-down public sector, the California Air Resources Board auctioned $233 million of pollution permits on Nov. 14 — and got nothing for it. Such a deal.

Pollution will not be reduced in California. Yet that was labeled a “success” by CARB Chair Mary Nichols.

Industries and public utilities bought 23.1 million pollution permits rather than reduce so-called toxic emissions.  Most people would call that a failure — unless the unstated goal is “tax farming” (private tax collection) rather than reducing air pollution.

The Nov. 14 auction was the first ever under CARB’s Cap and Trade program, which was authorized under Assembly Bill 32, the Global Warming Solutions Act of 2006. AB 32 requires excessive air polluters to buy emission permits in an auction from those industries and utilities that pollute less than their pollution quota. The rules of Cap and Trade apply first to large industries; and by 2015 to utilities, including local municipal water and power departments. Eventually, 360 industries and utilities will be subject to Cap and Trade rules.


CARB apparently considers it a success when industries, instead of reducing pollution, pay off government.  But the definition of success should be when industries have to buy a minimum number of permits because they already have reduced their emissions.  CARB seems to meet the classic definition of a bureaucracy where the manifest function — in this case, to reduce pollution — has been surpassed by its latent function — to tax industries and public utilities.

CARB reported that the money taken from businesses will be re-circulated back to electricity ratepayers in the form of a rebate called a “climate dividend.”  But why have an auction in the first place if CARB is just rebating the monies?  This is why the state Legislative Analyst’s Office believes a pollution permit auction is not needed to accomplish pollution-reduction goals.  Why doesn’t CARB instead use its conventional regulatory powers to enforce excess air pollution?


This is the basis of the California Chamber of Commerce’s recent lawsuit claiming that the auctions are “a revenue raiser” that never was authorized under the Cap and Trade law. California law mandates that tax increases must be passed by a two-thirds vote in the Legislature.

Moreover, the auction conducted last week by CARB proved that Cap and Trade is a tax. As someone who has conducted real estate auctions, I know that, by definition and by practice, an auction is the process of a sale by competitive bidding.  In an auction, whatever is being sold goes to the highest bidder.  That is not what happened at the Cap and Trade auction. Bid prices for nearly all 23.1 million permits went for the minimum bid of $10 per ton of pollution, or a few cents more in some cases.  Bidders merely paid their tax and went back to business without reducing any emissions.

Twenty five percent of the auction proceeds will go toward “disadvantaged communities” that have a high proportion of low-income residents in residential communities near polluting industries.  Air pollution doesn’t stay put in the Los Angeles Air Basin or anywhere else.  In Los Angeles County, any visible pollution is typically pushed up against the wealthy suburbs near the San Gabriel Mountains, such as Fontana, Rancho Cucamonga and Upland.

But these wealthier communities are not considered “disadvantaged” by CARB.  It is obvious to most observers that Cap and Trade auctions generate a 25 percent surtax, not rebates for electric ratepayers.

CARB conducted a “shakedown cruise” of its Cap and Trade auction. But what really happened was a tax shakedown that will be indirectly conducted through utility rates and loaded into the price of industrial goods and transportation, accomplished through this sham of an auction.


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  1. Rex the Wonder Dog!
    Rex the Wonder Dog! 21 November, 2012, 06:30

    Should benamed Cap em an Scam em

    Reply this comment
  2. Ted Steele, Prosecutor
    Ted Steele, Prosecutor 21 November, 2012, 06:39

    To misquote Learned Hand re conspiracy—

    “Cap and Trade, the darling of the Reagan nursery”……


    Reply this comment
  3. Bubba
    Bubba 21 November, 2012, 06:41

    Mary Nichols has risen to her highest level of incompatence! This is called the Peter Principal.
    This can only happen in California and Washington D.C.

    Reply this comment
  4. Rex the Wonder Dog!
    Rex the Wonder Dog! 21 November, 2012, 08:50

    Once again Teddy, Ronnie Raygun did not invent cap n scam , no matter how many times youpoist it, you mental midget 😉

    Reply this comment
  5. Dyspeptic
    Dyspeptic 21 November, 2012, 09:17

    Just another Sacramento shakedown to fleece the denizens of this fools republic. Private Industry and the Public Utilities will pass these additional costs on to the unsuspecting nincompoops (hello Ted) who populate the state without any decrease in alleged pollution. The only beneficiaries of this racket will be state bureaucrats and the illegal alien hordes who will be showered with free stuff at our expense.

    It needs to be said that the detestable bureaucratic tyrant Mary Nichols was foisted on us by the old sleaze ball himself, Arnold Schwarzenegger. Another reminder of how utterly useless Crazyfornia Republicans are.

    I vote for Cap and Tax on Teddy, Uhaul, Queeg, Skippy and SeeSaw. The gaseous emissions from these statist drones are ruining the CWD environment. Maybe the proceeds from this enlightened policy could be used to spruce up the website with an edit function for comments, like/dislike buttons and some snazzy graphics.

    Wayne, since the article doesn’t make it clear, what kind of “pollution” are we talking about here? Is this scheme a tax on greenhouse gases or all forms of emission? Is small business exempt from this extortion racket?

    Reply this comment
  6. Wayne Lusvardi
    Wayne Lusvardi 21 November, 2012, 09:58

    Cap and Trade is a program to reduce air pollution and is run by the California Air Resources Board. The first phase directly imposes Cap and Trade “auction” surtaxes on big industries and large regulated electric utilities. The second phase will impose surtaxes on large wholesale government water agencies (the California Dept. of Water Resources and the Metropolitan Water District of So. Cal.). Small businesses are not directly taxed — instead they will be indirectly affected by higher utility rates and higher costs of wholesale goods. Cap and Trade is a fictional auction – in a real world auction the “successful” bidder is the highest bidder. What happened last week is that nearly every bidder just paid the minimum bid of $10 per ton of “allowed” air pollution. When the Air Resources Board starts restricting the number of permits issued then there will be a scarcity of permits and the prices will spike upward in the auctions. Then there will be real pain and resulting inflation in the price of goods and transportation and utilities. Enforcement doesn’t kick in until 2015. My guess is that small businesses will reduce hours of operation to avoid higher utility costs which will lead to stagnant economy and more part time workers. In addition, Obamacare will begin and small businesses will cut back employees to 30 hour work weeks to avoid the Obamacare tax. That will compound the economic stagnation. Many people will take two jobs to make up for the lost hours of work. Look for a spike in traffic accidents and divorces and greater air pollution from autos as people take two jobs.

    Reply this comment
  7. Dyspeptic
    Dyspeptic 21 November, 2012, 10:54

    Wayne, thanks for the response but I am still not clear on the types of “air pollution” being taxed via the auction process. For example, are nitrous oxides, sulfur dioxide and VOC emissions affected or just carbon dioxide, water vapor and other greenhouse gasses?

    Reply this comment
  8. The DA
    The DA 21 November, 2012, 11:11

    “AB 32 requires excessive air polluters to buy emission permits in an auction from those industries and utilities that pollute less than their pollution quota.”

    A few questions: Who in fact is making the money here? Is there a record of which industries and utilities raked in the most cash from the sale of their permits? How does the government make any money with this scheme? Do they get a percentage off the top? Can industries with plants in different locations sell permits to themselves if one is below the pollution quota and the other above it?

    The whole Cap and Trade system sounds like the type of convoluted set-up that would make Rube Goldberg proud. Since it is never going to solve the “pollution problem”, then the question is who stands to make the most money from this debacle?

    Reply this comment
  9. Ted
    Ted 21 November, 2012, 12:41

    LOL sorry Poodle You’re now 0 for 15 ™ !

    Reply this comment
  10. Rex the Wonder Dog!
    Rex the Wonder Dog! 21 November, 2012, 19:08

    Teddy, I am not even going to read your dump copy n paste baloney, it will be just like the last time you did that and you proved NOTHING.

    Reply this comment
  11. Wayne Lusvardi
    Wayne Lusvardi 21 November, 2012, 19:45

    To DA:

    The proceeds from the Cap and Trade auction go to the Air Resources Board — the industries that have low levels of pollution do not get the auction monies.

    Cal and Trade will start reducing air pollution in 2015 by phasing in an enforcement component. The planned auctions before 2015 are nothing but apparent shakedowns.

    Reply this comment
  12. Ted Steele, Prosecutor
    Ted Steele, Prosecutor 21 November, 2012, 20:36

    Poodle— You are right—- it will NEVER prove anything to you! You’re like a child!

    0 for 14 ™ !

    Any comment about your amazing prop 30 predictions?

    Reply this comment
  13. Right winger
    Right winger 21 November, 2012, 22:20

    I miss riding my 2 stroke dirt bike around Saddleback. The commies have taken over.

    Reply this comment
  14. Ted Steele, Prosecutor
    Ted Steele, Prosecutor 22 November, 2012, 07:29

    Right winger–

    I know what you mean. Saddleback is lousy with commies. Makes me want to lay some snake and nap down on the treeline.

    Reply this comment
  15. Rex the Wonder Dog!
    Rex the Wonder Dog! 22 November, 2012, 08:27

    Makes me want to lay some snake and nap down on the treeline.
    Teddy, the only thing you have laid down is your brain, and common sense, and backbone, and dignity, and honor, and……. 😉

    Reply this comment
  16. Ted Steele, Prosecutor
    Ted Steele, Prosecutor 22 November, 2012, 19:02

    …and…..0 for 14 ™ !

    Rexy the French Poodle– wrong since 1978 ™ !

    Reply this comment
  17. Rex the Wonder Dog!
    Rex the Wonder Dog! 22 November, 2012, 21:30

    I wasn’t even born in 78!

    Reply this comment
  18. Ted Steele, Prosecutor
    Ted Steele, Prosecutor 22 November, 2012, 21:52

    …and can’t remember his birthdate! LOL

    0 for 14 ™ !

    Reply this comment
  19. Rex the Wonder Dog!
    Rex the Wonder Dog! 23 November, 2012, 21:48

    Teddy, you cant make a prediction because you have your tail tucked, as always!!!!!

    Reply this comment
  20. Ted
    Ted "Eddy Baby" Steele, Associate Prof. 24 November, 2012, 06:52

    0 for 14 ™! Baby!!!

    And Poodle, could you explain the logic you used for your 6 month long massive prop 30 fail? Bwahahahaha

    well….or your pension rollback lawsuit fails? Oh my!

    Any more predictions little buddy?

    Reply this comment
  21. BobA
    BobA 24 November, 2012, 15:43

    Wayne Lusvardi:

    At the end of the day when all is said and done, Cap & Trade will have amounted to nothing more than collusion between the government and it’s big business cronies to drive small and medium businesses out of business while enriching themselves at the same time.

    Ever wonder why the largest corporations are all on board with Cap & Trade? Ever wonder why the loudest mouths pushing Cap & Trade down our throats always seems to be the richest people in America? Ever wonder what’s in it for the politicians who’re pushing Cap & Trade? Ever wonder what’s in it for the so-called scientists who are pushing global warming? Does anyone naively, and foolishly, think they’re doing it for a noble cause? Perish the thought and follow the money.

    Cap & Trade reeks of money and greed and corruption. The corporate oligarchs and their political partners will line their pockets at everyone else’s expense while furthering their stranglehold over the American economy and the American people. They, the American ruling class, will get a lot richer while we, the people of the United States of America, will become poorer.

    For what it’s worth: California could cut it’s carbon emissions to zero tomorrow and it wouldn’t even amount to a tenth of a percent difference in the overall carbon emissions being dumped into the atmosphere not tomorrow not ever.

    Reply this comment
  22. SeeSaw
    SeeSaw 24 November, 2012, 17:50

    Dyspetic, I see I made your hate list, again–I don’t know what gaseous emissions from me you are referring to–you must still be mad because I was among those who kicked your ass on election day. Of course you didn’t get any message from that, did you–god forbid anyone thinks differently or expresses a thought that is different from the way you look at things.

    BobA, I don’t know much about this Cap and Trade program–don’t know yet how to judge whether or not it will be a disaster for Californian’s. You make the statement that the state could cut it’s carbon emission to zero tomorrow and it wouldn’t make a difference. I have to take issue with that thought, because I remember 40 years ago when there were days that we couldn’t even see the mountains to the north–and days when children playing in groups outside had to be herded indoors, so they didn’t breath all the smog. We went through a program at work, mandated by the air quality control district, that we car-pool, walk, or ride bikes to work. I both walked and rode a bike. Then the program was abruptly ended–I don’t remember if it ended because it made a difference, or because it didn’t. I do know that we can see those mountains now–I suspect most of it had to do with the required emission equipment on our autos.

    There is one piece of equipment that I would like to see abolished forever–the gasoline-powered leaf blowers. The noise does not hurt me. When I was working, every Monday was blowing day. All that activity does is move the same dirt to a different place, including our indoor rooms, and swirl all kinds of carcinogens into the air, including all the pollens that would normally fall to the ground, instead of bothering people with allergies. Then, they wonder why so many children are growing up with asthma. My husband’s truck sits in our driveway, because there is no room for it in our garage. On Wednesdays, it gets a dirt bath from the gardeners next door. Yes, that is the most hated, carbon-spewing machine in my life–why hasn’t some air control district attacked it!

    Reply this comment
  23. BobA
    BobA 25 November, 2012, 08:37


    I was born and raised in the city of Los Angeles and I remember those days when the smog was so thick you could slice it with a knife. Of course, those were the days before catalytic converters. Catalytic converters function to oxidize carbon monoxide to the the less harmful carbon dioxide gas and to reduce nitrogen oxides to nitrogen gas. Also, that was when the switch to unleaded gas came into effect because the lead (tetramethyl or tetraethyl) additives to gasoline poisoned catalytic converters. Additionally, gasoline also contains small quantities of sulfur which when combusted, appears in the exhaust gas as sulfur dioxide. The catalytic converter oxidizes this gas to sulfur trioxide which when mixed with water, a by product of reducing nitrogen oxides, gets converted into the highly corrosive sulfuring acid.

    The air is a lot cleaner today than it was in yesteryears but that does not imply that we should stop our efforts to to further reduce harmful emissions. Not so much for the carbon emissions but more so for the other molecular by-products of burning hydrocarbon fuels.

    In all that scare about carbon emissions and global warming, the one thing that never gets mentioned is that it may be a problems for humans but plant life would love it and thrive. Carbon it not as deadly as it’s made out to be.

    What’s more deadly to the environment is human waste and the other human by-products that is more problematic. Like the dumping of toxic metals into fresh water lakes & rivers and on the soil, deforestation, over fishing and the rise of genetically modified foods (aka, Franken-foods) for which the somatic and genetic effects are still unknown.

    We can stop all carbon emissions but unless we address the problems I just cited above, we won’t have solved a thing. Clean air won’t mean a thing if the water is to toxic to drink, the soil is to poisoned for anything to grow and whatever food source that is left is to tainted to eat.

    Reply this comment

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