Brazil Is the New America: How Brazil Offers Upward Mobility in a Collapsing World (19 page)

But the further the global warming vigilantes stray from writing sad obituaries for future generations of polar bears into actually specifying the climate control they would like to achieve, the more they risk undermining their support. Let them specify some target temperature to which they hope to cool the planet, and the whole debate could be transformed.

Why? Because lower temperatures have ponderable consequences, most of them bad, like shorter growing seasons, food shortages, and higher prices in a hungry world. It is no exaggeration to suppose that lowering global temperatures by a few degrees Celsius could cost the lives of hundreds of millions, even billions, of poor people around the globe.

Get people thinking about this, and it could jeopardize the big power grab/money grab that Obama, Gore, and the IPCC are so keen on. That is why the manipulators who orchestrate the campaign over global warming only want to rail against far-fetched consequences of a runaway global heat wave, rather than tell us how far they intend to cool the planet.

For all the recent hysteria and fulmination, warming has historically been a positive for civilization, while cooling has meant famine, disease, depopulation, and political collapse. Even a nodding acquaintance with history suggests a lot of good reasons to question the wisdom of trying to cool the planet as Gore and company seem intent on doing. But there is a method to Gore's madness. He will make billions of dollars if he can prevail on the United States and China and other leading economies to join the European Union in adopting cap and trade legislation. His payday is getting closer as several U.S. states and six Chinese provinces have adopted cap and trade programs.

Gore owns about 10 percent of the Climate Exchange PLC, (CLE) a public company listed on the AIM section of the London Stock Exchange. The Climate Exchange PLC owns the European Climate Exchange, the Chicago Climate Exchange and the Chicago Climate Futures Exchange. According to the UK newspaper
The Guardian
, the carbon trading market could be worth $3 trillion annually—twice that of oil in the next decade—if global governments ratify the “cap and trade” proposal Gore is pushing.
33

No wonder Gore is so keen. He'll make many billions if Obama can convince enough congress-folk to enshrine his global warming theories into law. By their say-so they can make the trading of nothing the biggest market on the globe. Yes, that is what the carbon markets trade, not carbon, per se, but something close to nothing—promises of not-carbon, known as carbon offsets.

Consider if you purchase a contract of frozen pork bellies on the Chicago Mercantile Exchange for February delivery, and you don't liquidate your contract before it settles; you'll be contacted by someone to find out where you want to take delivery of 40,000 pounds of uncut bacon.

Not so with carbon trading. Carbon traders don't actually trade carbon. If you buy a CO
2
emissions contract on the European Climate Exchange and you neglect to sell your contract before settlement, no worries. You don't have to fret about someone pumping a metric ton of CO
2
through your letter slot. It doesn't work that way. With Gore's carbon market there are no physical deliverables.

You see you are not actually trading carbon dioxide. You are trading the right to emit CO
2
. Much of the time, that right is tied to an offset, or a promise from someone, somewhere not to produce CO
2
. So Gore's carbon market is not actually a carbon market. It is a fun house mirror version of a carbon market—a not-carbon market that deals in promises not to produce carbon dioxide.

As Mark Schapiro reported in the February 2010 issue of
Harper's
,

. . .unlike traditional commodities, which sometime during the course of their market exchange must be delivered to someone in physical form, the carbon market is based on the lack of delivery of an invisible substance to no one.
34

So you have a multitrillion dollar market in promises invented by a politician who will become a multibillionaire for his pains, if the eloquent Mr. Obama can only persuade enough congress folk to join others in ratifying it.

When you consider how many energy inputs are required to live a middle-class life in a developed country, the global warming remedy championed by Gore and company is really a recipe for lowering living standards worldwide. It would make the middle class poor and the poor destitute. But it would put billions in Gore's pockets.

It is really a perverse attempt to mobilize incentives in order to maximize malinvestment in the energy field. In this respect, the estimate that carbon markets could reach a volume of $3 trillion within a few years of broad enactment of cap and trade underestimates the amount of capital that would be misallocated through the system.

For one thing, the fact that the CO
2
emission offset credits could be available only on projects with certified “additionality” means that providers of not-carbon could only receive payments through the system's clean development mechanism (CDM) so long as their projects did not make economic sense. To decipher this requires close attention.

The requirement of additionality involves a complex counterfactual in which credits are permitted for projects that do not emit carbon only if the carbon they don't emit would otherwise have been emitted. Got that? It means that to qualify, the project receiving the payments would otherwise have had to be unprofitable.

Consider how this might work in these two examples:

As I understand the rules, example number two could qualify for carbon offset payments, as it would reduce CO
2
emissions by employing otherwise uneconomic techniques. Example number one seems like a much more environmentally friendly approach, but would not qualify because it is a best practice that already makes economic sense. Developers of carbon offsets must prove that their projects make no economic sense in the absence of CDM funds.

Gore's approach is designed to ratchet up the price of carbon offsets as it places a stranglehold on carbon emissions, a formula for lowering living standards, and also raises the total value of carbon trading on his climate exchanges. The requirement of additionality places pressure for an upward ratchet on the prices of offset projects by implying that as carbon emission prices rise, the price rises necessarily become self-reinforcing. Previously-uneconomic offset projects stand to be disqualified as they begin to make economic sense due to higher prices.

Another notable drawback of Gore's plan is that it requires the creation of a vast new bureaucracy of otherwise unnecessary emissions assessors. Operating under the auspices of the United Nations, the emissions assessors function through what are known in UN-speak as Designated Operational Entities (DOEs). They are best understood as climate accountants who audit promises of “not-carbon.” Among the prominent firms that have signed on as DOEs is Deloitte Touche.

The emergence of climate auditors is a corollary to the lack of physical deliverables in Gore's carbon market. Presently, most of their attention is directed to first validating and later verifying emissions reductions (the promises of not-carbon) that can be used by purchasers against their emission caps.

Ultimately, however, as carbon emissions become more expensive, you can expect climate accountants to spread and conduct climate audits on practically every business and even on you. If you are fond of barbecue, you can bet that you will someday be obliged to contribute another increment to Gore's fortune by buying an offset on one of his climate exchanges if your jurisdiction joins the cap and trade scheme.

This no longer seems as inevitable as it did when Obama was elected.

At the margin, even congress folk will hesitate to slash the living standards of their constituents in order to cool the planet when it is already too cold for comfort. Another factor that will deter your august leaders from behaving like puppets in Gore's scheme is the fact that there are serious concerns about fraud on multiple levels in the European Climate Exchange.

Mark Schapiro explained in the
Harper's
February 2010 issue that, “Study after study has demonstrated that CDMs (clean development mechanism offsets) have not delivered the promised amount of emissions reductions.” The anti-CO
2
fanatics are not convinced that trading “not-carbon” works to reduce emissions as much as advertised.
35

Meanwhile, more traditional fraud appears to be rampant in CO
2
emissions trading. As Bloomberg's Matthew Carr has reported, there is a serious problem with theft, tax evasion, and traffic in stolen emissions certificates:

European regulators need to take “decisive action” after a new round of fraud tainted the world's biggest emissions market, according to the head of carbon trading at Barclays Capital.

Germany's Federal Environment Agency said Feb. 3 that about 250,000 CO
2
allowances with a market value of 3.2 million euros ($4.4 million) were improperly transferred after cyber attacks. The “phishing” incidents on Jan. 28, with fraudsters impersonating regulators to steal passwords, comes after Europe lost a total of 5 billion euros in revenue for the 18 months ending in December 2009 because of value-added tax fraud in the CO
2
market, according to Europol, the law enforcement agency.

“Without consistent and decisive action by the European Union, the world's flagship carbon market will become mired in fraudulent activity,” Louis Redshaw, managing director at the investment-bank unit of Barclays Plc, said in a phone interview.
36

All told, there is good and bad news about the progress of Gore's project to make billions by making the world colder. The best news is that he can no more dial down the world's thermostat than King Canute could turn back the tide.

A big piece of the bad news, however, is that the quality of public discourse has sunk so low that millions of people, including many in authority, are quite prepared to accept propositions like the anthropogenic global warming fraud—the concept that manmade CO
2
emissions threaten to turn the planet into an uninhabitable inferno. The true believers are not even polite about it.

For example, Jeff Goodell, who wrote an article entitled “You Idiots: Meet the Planet's Worst Enemies” for
Rolling Stone
, is quick to castigate entrepreneurs like David Koch who dare to challenge global warming myths. And he vents with hysterical hyperbole about any resistance to Gore's schemes. Witness,

As the failure to pass the climate bill reveals, it may be easier to defeat a dictator like Hitler than to overcome internal threats to our future as powerful as Big Coal and Big Oil. Despite the near-certainty of a climate catastrophe, there are no crowds marching in the streets to demand action.
37

But he and others have been silent about Gore's luminous conflicts of interests in advocating a cap and trade mandate that would make him a billionaire while making the world poorer.

Equally, one could infer that episodes like the banning of CFCs and now global warming misinformation somehow parallel the financial crisis. They imply an exhaustion of profit potential from conventional economic activity, as many industries seem to prefer counterproductive political campaigns as the route to raise profitability in saturated markets. (The logical flaw here is that if markets are really saturated, the scope for politicians to extract extra trillions from them is smaller than they seem to think.)

Consider the unspoken subtext of the CFC ban, as reported by David Van Dyke:

The other significant coincidence that happened about this same time was that DuPont, a major CFC manufacturer, was poised to lose its patent on one of the most widely-used CFCs. Three Canadian investors who owned 25 percent of the company led the campaign to ban CFCs. DuPont initially fought the CFC phase out, but the company finally acquiesced when it had secured a patent on a CFC substitute. After all, billions of dollars were at stake.
38

In short, the CFC ban was a cynical scheme to replace cheap, effective, generic products with costly, less-effective proprietary products with high margins. The CFC ban was all about money for manufacturers of refrigerant and refrigeration equipment, and money for drug manufacturers who were able to scam consumers into acquiescing in political actions that raised costs of refrigerants and propellants by magnitudes. Van Dyke summarizes:

The media never seemed to report the real economic impact of the CFC ban. Replacing CFCs was not at all easy. There really are no suitable, safe, and affordable replacements for Halon fire control systems. Most propellants were not too difficult to replace (although many are flammable). One notable exception is the CFC propellant used in metered dose inhalers of asthma medication. CFCs were ideal for this application because they are both chemically and biologically inert. Eventually, the pharmaceutical industry found a solution: hydrofluoroalkanes (HFA). Of course, this new delivery method meant that previously inexpensive generic drugs (e.g., albuterol) suddenly became expensive proprietary drugs. The CFC ban effectively tripled the cost of managing asthma.