Misdirecting Billions of Capital Investment Dollars -- With Very Little Risk

Cap and Trade: Final vote - passes 219-212 (June 26, 2009)

THE ROLL CALL VOTE shows 8 GOP voting for Cap and Trade:

1. Bono Mack - Mary Bono Mack R-CA
2. Dave Reichert R-WA
3. Mark Steven Kirk R-IL
4. Mike Castle R-DE
5. Leonard Lance R-NJ
6. Frank LoBiondo R-NJ
7. Chris Smith R-NJ
8. John McHugh R-NY
   

Two GOP members did not vote:

1. Jeff Flake R-AZ
2. John Sullivan R-OK

WHY?

• Can someone explain Jeff Flake R-AZ?
• May 29, 2009 Rep. John Sullivan (R-Okla.) said that he has entered the Betty Ford Center in California to receive treatment for his addiction to alcohol, the Tulsa World reported today.

Six Snippets: Follow the Money

1.
GOP voting aye include those who support the interests of the American Wind Energy Association 100% of the time (2006 survey):

Mary Bono Mack R-CA (but husband Rep. Connie Mack IV R-FL voted nay)
Dave Reichert R-WA
Mark Steven Kirk R-IL
Mike Castle R-DE
Leonard Lance R-NJ (elected 2008, and not included in the 2006 survey)
Frank LoBiondo R-NJ
Chris Smith R-NJ
John McHugh R-NY
Jeff Flake R-AZ (did not vote)
John Sullivan R-OK (did not vote)

AWEA is a national trade association representing wind power project developers, equipment suppliers, services providers, parts manufacturers, utilities, researchers, and others involved in the wind industry - one of the world's fastest growing energy industries."

2.
Free Allocation of Carbon Allowances Means Windfall Profits for Energy Companies at the Expense of Consumers:
A.
Take a look at the one real-world case where cap and trade was used for carbon emissions -- Europe. Under the EU’s Emissions Trading Scheme (ETS), almost all of the permits were given to polluters for free.1 And, as it turned out, firms reaped windfall profits from consumers based on the market value of the permits they were given.
B.
Center for Clean Air Policy. Anne E. Smith and Martin T. Ross, “Allowance Allocation: Who Wins and Loses Under a CO2 Control Program?” February 2002.
“Although a cap-and-trade program with all allowances auctioned would have severe effects on the coal industry (a predicted 65 percent loss in equity value in 2010) and would hurt other energy-related sectors (oil and gas extraction, refining, gas distribution, and electricity generation would feel equity losses in 2010 of between four and eight percent), the average losses in each sector could be offset by grandfathering them only nine percent of total U.S. allowances.” (Page 28)
C.
Note that selling permits, rather than giving them out for free, does not change the underlying dynamic of price increases for consumers. No matter how permits are allocated—whether through auctioning, grandfathering, or some other form—firms will attempt to charge consumers for the market cost of the allowance. Consumer prices will go up exactly the same amount, regardless of how the permits are distributed initially.

3.
About redistributing wealth:
“This is about protecting families and small business, and not selling them out to provide a windfall to some other part of the population. The message is: ‘Don’t give away my allowances to someone who does not need them.’ Allowances should be about helping people avoid financial pain, not about redistributing wealth.” – NRECA CEO Glenn English

4.
Risky schemes and fraud: In April 2007, the Financial Times (FT) launched an investigation into carbon trading that uncovered numerous problems with trading and offset schemes. “The rush to go green suggests easy money for investors in projects that reduce carbon dioxide output,” the FT reported. “The reality is otherwise: many carbon projects turn out to be high risk.” Carbon traders and analysts told the FT that because of project failures and over-optimism, “40-50 per cent of the carbon credits anticipated under the Kyoto protocol will never be delivered.” Worse, as the FT’s environment correspondent Fiona Harvey noted, carbon trading runs “the risk of fraud, such as sale of credits from carbon reduction projects that do not exist. It is often difficult for buyers and brokers to verify the existence and effectiveness of projects as many are in remote areas.”

5.
Shady deals and dependence on federal subsidies
A.
Wind power companies want federal renewable standards
May 6, 2009 by Kellen M. Henry and Chris Deaton in Medill Reports
Wind power developers say they need a greater commitment to renewable energy policy and more money from the federal government, as the country leans on alternative energy producers to bolster the sagging economy. Industry leaders stressed the need for renewable energy standards at this week's American Wind Energy Association's WINDPOWER 2009 conference in Chicago.
B.
Italian mafia muscling its way into wind farm business
May 6, 2009 by Dave Goldiner in Daily News
Several mob-linked wind projects later were found to be poorly built, and some are now off-line. "This is the amazing thing, that developers got public money to build wind farms which did not produce electricity," Roberto Scarpinato, a veteran anti-Mafia prosecutor in Sicily, told the Financial Times newspaper.
C.
Green energy tangled in web of shady deals
May 4, 2009 by Guy Dinmore in Financial Times
Multinationals are starting to find out something that is well known to Italian investors: that concealed beneath Europe's most generous system of incentives - supported by "green credits" that industrial polluters have to purchase - there exists a web of corruption and shady deals.

6.
Massive redistribution of wealth
Mr. Pickens probably can make a 25 percent return by building a costly wind farm, but at the expense of millions of ordinary taxpayers and electric customers. His decision shows dramatically what Congress and other federal and state officials have been slow to recognize; i.e., wind farms are being built primarily for their lucrative tax benefits and subsidies, not because of their environmental or energy benefits. Contrary to wind advocates’ claims, wind farms are not environmentally benign, their environmental advantages are greatly overstated, and their adverse impacts are significant.

A 25 Percent Return with Little Risk: Mr. Pickens’ plan to earn a 25 percent return on a $10 billion investment in wind may sound risky but with huge federal and state tax breaks and subsidies now available, there is little risk. . . officials seem either not to recognize what they have done or not to care that federal and state wind energy policies, tax breaks and subsidies for the wind industry are:

• Transferring hundreds of millions of dollars annually from the pockets of ordinary taxpayers and electric customers to a few large corporations that own wind farms or that buy tax credits from wind farm owners who cannot use them. These include US firms such as the FPL Group that apparently has been able to escape paying any federal income tax in some years despite large profits, as well as several Wall Street and foreign-owned firms (e.g., Iberdrola, Shell, BP, Babcock & Brown) that wish to reduce the federal corporate income tax that they would otherwise have to pay on profits from other operations.
• Misdirecting billions of capital investment dollars to energy projects (wind farms) that produce very little electricity and that electricity is low in quality and real value. Electricity from wind turbines is intermittent, volatile, and unreliable. The electricity is low in real value because it is most likely to be produced at night in colder months, not on hot weekday late afternoons in July and August when electricity demand is highest. Further, because wind turbines are so unreliable, they cannot substitute for the reliable generating capacity required to meet growing electricity demand or replace old generating units.