Cap and Trade

E-mail to Congress:

The House has already passed the Cap and Trade bill, but you can still be instrumental in reducing this to a nonentity during subsequent negotiations with the Senate.
Based on the European program, which is already in effect, here is how it would work in the US. The Federal government would specify a total annual allowable production of carbon dioxide from major carbon dioxide generating sources (total "cap"), such as petrochemical plants, natural gas purification, electric utilities, etc.. This total would then be subdivided to individual generators (individual "cap"). For example, Lubbock Power and Light would be allowed production of a maximum number of tons of carbon dioxide per year. For any excess production of byproduct carbon dioxide associated with the need to produce electricity for their customers, they would have two options.
The first option is to install equipment which would capture (sequester) enough generated CO2, so that they would not exceed their annual "cap". Installation of such equipment would be a significant capital investment. Alternatively, they might contract out the sequestering to another firm, which would capture the CO2 and charge LP&L for the tonnage captured. There are other commercial arrangements possible, but they would all have the same net effect of increasing LP&L's production cost and prices to customers. The commercial advantage would be to companies selling capital equipment for carbon dioxide sequestration or those selling a sequestration service. It has just been reported that Dow Chemical has established a working relationship with the Russian energy company Gazprom. You can be sure that this arrangement is motivated by opportunity for profit, rather than public service. The open question is always, "Is carbon dioxide sequestration necessary?"
The second option that would be available to a CO2 generator, such as LP&L, would be to "trade" rights on carbon dioxide emission. The going rate for a "right" in Europe is now $16 per ton. If LP&L were to generate annually 100,000 tons more CO2 than allowable by their "cap" and they chose to purchase rights rather than use Option 1, they would increase their annual production costs by $1.6 million, which would then have to be allocated to customers as a price increase.
With respect to an understanding of "rights", the basic concept is included in the theory of "Cap and Trade". The "rights" concept is relatively simple. If a producer of byproduct carbon dioxide, such as an electric utility, decides to install capital equipment for carbon dioxide sequestration, he may end up with the ability to sequester somewhat more carbon dioxide than is needed based upon his "cap". Each ton of that excess carbon dioxide sequestration is then available for "trade" (sale) to another company which decided not to sequester and is producing more carbon dioxide than allowable by its "cap". These transfers, which may take place ostensibly at $16 per ton, will proceed through a newly established trading procedure. Energy companies or related financial companies will likely develop these trading organizations, which will take a portion of the "trade" price to cover their costs and profit. In addition, the federal government will establish a significant tax (yet to be determined). The net result of these gyrations is the same as Option 1, namely increased prices to consumers because of costs for an unnecessary system. The advantages will be to the trading organizations and to the Federal government in the form of increased taxes.
As I recall, the original Cap and Trade bill of the House was more than 900 pages and the likelihood is that you did not have an opportunity to read it, although it is said you voted correctly against it. We should eventually address the fact that legislation is confusingly overloaded with excessive verbiage, but that is another matter. Meanwhile, let's kill this Cap and Trade bill by whatever means necessary.