It’s possible that no concept in history has ever come so far,
so fast, and with so little substance behind it, as “global
warming.” Or, to be precise, anthropogenic
global warming (AGW) – the kind caused by us puny humans rather
than by that fireball that keeps the planet habitable.
We’re extraordinarily lucky. If present thinking is correct, the
first single-celled living organisms may have appeared as much as 3½
billion years ago, and it would appear that once life arrived, it never went
away. That’s a very long time for conditions to have remained favorable
enough to keep the chain from breaking.
As the eons unspooled, Earth’s climate varied, sometimes wildly.
It has been much hotter than it is today, and much colder. (One current
theory holds that the average surface temperature has regularly oscillated
between 120° and -50°F.)
Nearly all of the changes have been due to variations, some of them cyclical,
in the amount of solar radiation reaching the surface of the planet. Through
it all, life endured, because of the existence of carbon.
Now, rather suddenly, carbon is the designated boogey man.
Individually and collectively, we are told, we must work on reducing our
“carbon footprint,” or else something awful is going to happen.
The headlines are terrifying: we’ll have hellacious droughts, monster
hurricanes, and entire cities disappearing beneath the waves.
Well, perhaps. In a climatic feedback system as complex as
Earth’s, anything is possible. More likely, though, is that we’ll
see none of the above. Or at least not because of anything humans do or fail
to do.
The simple (yes, inconvenient) truth is that scientists don’t
even know whether the planet is warming at
all, let alone if AGW has any role in causing it. The data are
inconclusive at best. Most of those dire predictions you’ve read are
based upon computer modeling, and anyone who watches the nightly weather
forecast knows how infallible that tends to be.
Yet the truth has not prevented the AGW theory from being presented to
the public as fact. Its proponents have so captured the media that Al
Gore’s Nobel Prize is a huge story, while the Manhattan Declaration of
2008 gets nary a mention in the press. The latter, endorsed by hundreds of
prominent citizens, including two hundred climate scientists, concluded that “current
plans to restrict anthropogenic CO2 emissions are a dangerous
misallocation of intellectual capital and resources that should be dedicated
to solving humanity’s real and serious problems.”
Sadly, that misallocation is about to get a whole lot bigger. If the
Obama administration has its way – and it is expected to, since
there’s no meaningful opposition – carbon caps will soon be
coming to every American town.
If you’re unfamiliar with the concept of a carbon cap,
it’s simple. It’s a tax. The president wants to reduce per-capita
U.S.
carbon emissions to 14% below 2005 levels by 2020, and 83% by 2050. And
he’s promoting this as a good idea by suggesting that it will pour $646
billion into federal coffers between 2012 and 2019, through government
auctions of the rights to emit greenhouse gases. Those rights would be sold
to energy companies, manufacturers, utilities, or anyone else who
“pollutes” the air with carbon dioxide. And they could be traded.
Leave aside the question of whether reducing human carbon emissions is
truly a valid goal; and whether we need another huge tax; and whether the
government will do anything constructive with an infusion of our money, to
the tune of nearly two-thirds of a trillion dollars. Instead, just consider
the consequences.
The cost of everything will go up, as the affected businesses
compensate for their lost revenue. If carbon credits are auctioned at the
lower end of the projected range (between $13 and $20 a ton), estimates are
that the average price of gasoline will jump by 12 cents a gallon and the
average electricity bill by 7%.
Worse, though, is that the pain will be unevenly distributed. As the Detroit News editorialized, the
cap-and-trade plan “is a giant dagger aimed at the nation’s
heartland -- particularly Michigan.
It is a multi-billion-dollar tax hike on everything that Michigan does.”
That is, it penalizes states and regions with large manufacturing
bases and coal dependence for electricity, and rewards places with larger
populations but light industry and cleaner power plants. As Michael Morris,
CEO of coal-heavy American Electric Power, put it:
“It is a clear transfer of the middle part of the country’s
wealth to the two coasts.” Small wonder that politicians from California and New England
are such enthusiastic supporters.
For what to expect here, we can look to Europe,
where cap-and-trade is firmly established. While it has worked, in the sense
of lowering carbon emissions (though not by as much as anticipated), its
effects have been stifling. For example, the Washington Post cited “the Dutch silicon carbide maker that
calls itself the greenest such plant in the world, but now can't afford to
run full-time; the French cement workers who fear they're going to lose jobs
to Morocco, which doesn't have to meet the European guidelines; and the
German homeowners who pay 25 percent more for electricity than they did
before – even as their utility companies earn record profits.”
This is what’s coming to your town, if Congress capitulates to
the White House. The bill that will bring us cap-and-trade recently squeaked
through the House with just a single vote to spare. It faces an uncertain
future in the Senate, where opposition is stiff. Modifications surely will be
made. But with Al Franken having cemented the Democratic super-majority,
it’s a lock to pass in some form or other.
Ever-savvy, the market isn’t waiting. Although no cap is yet in
place, carbon credits have already arrived. There’s even a place to
trade them, the Chicago Climate Exchange (CCX), founded in 2003. And
companies are busily buying and selling in anticipation.
How does it work? CCX’s website
explains: “CCX emitting Members make a voluntary but legally binding
commitment to meet annual GHG [greenhouse gas] emission reduction
targets. Those who reduce below the targets have surplus allowances to
sell or bank; those who emit above the targets comply by purchasing CCX
Carbon Financial Instrument® (CFI®) contracts.”
In other words, some outfits are stocking up on purchased credits,
against the day when they’ll be required by law. Others are speculating
that the value of those credits will go up once the federal cap is in place.
And some are making a lot of money simply by selling carbon reductions they’ve
already made.
Among the players are expected names from the heavy industry and
utilities sectors: DuPont, Ford, Reliant, American Electric Power, Potash
Corp., Waste Management, and so on. But it’s a very long list, and on
it are tech companies like IBM and Intel; retailers like Safeway; Miami-Dade County, Florida and Sacramento County,
California; the University of Idaho
and half a dozen other schools; even the Embassy of Denmark.
There’s no secret key to why so many want a piece of this
action. It’s going to be a very, very big business. If European
standards are applied to the U.S.,
we’re talking about a quarter-trillion dollars of credit trading a
year.
Investors – if they’re well heeled enough and willing to
assume a lot of risk -- can participate directly in carbon credit trading. Or
they can buy stock in the parent of CCX, which is publicly traded in London.
But there are other ways to profit from this unstoppable force.
For example, by investing in select junior exploration companies
focused on alternative energies, oil, or uranium. But in these volatile
times, it is vital to not only invest in the right companies but to use the
right investment strategies. Like the 20-60-20 rule or the Casey Free
Ride Formula described in our new, FREE special report Profiting in a New Era. Applying these tactics can make the difference between losing your
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Doug Hornig
Caseyresearch.com
Doug
Hornig is a senior editor for Casey Research,
publishers of Doug Casey’s International
Speculator… for over 27 years
providing investors with unbiased and carefully researched recommendations
for high-quality gold and other natural resource stocks with the very real
opportunity for a 100% or better gain within a 12-month horizon. Hornig also writes the Daily Resource, a daily column
that appears on the KitcoCasey and CaseyResearch.com
web sites.
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