Mittwoch, Juli 01, 2009

Further Follies...

I'm getting more and more depressed. But thanks to Shrinkwrapped, I've decided to finish reading through Congress' Folly.

Okay. Let's keep on going.

I did learn something new today: Enteric Fermentation. It's what causes ... cow farts.

They're excluded. Specifically, on page 787. They don't count when counting methane sources. What a disappointment!

Jumping further down - there's a big section on what is what for various sources of emissions - we enter the world of how the government is planning on controlling derivatives on emission contracts and futures: the key word is bona-fide.

The list of energy products that are so controlled starts on page 882:

Coal, crude oil, gasoline, diesel fuel, jet fuel, heating oil, and propane;electricity (excluding financial transmission rights which are subject to regulation and oversight by the Federal Energy Regulatory Commission); natural gas; and any other substance (other than an excluded commodity, a metal, or an agricultural commodity) that is used as a source of energy, as the Commission, in its discretion, deems appropriate.

I've taken liberties with the formatting, since this doesn't change the story. Included are any futures contracts dealing with the above energy carriers.

First of all, they're going to declare any existing contracts, based on exemptions granted by the Commodity Futures Trading Commission that has allowed energy transaction, after 180 days after this becomes law, to be null and void (page 885):

Beginning 180 days after the date of the enactment of this Act, any exemption provided by the Commodity Futures Trading Commission that has allowed included energy transactions (as defined in section 1a(13) of the Commodity Exchange Act) to be conducted without regard to the requirements of section 4(a) of such Act shall be null and void.

The Government can limit futures contracts:

With respect to energy transactions, the Commission shall fix limits on the aggregate number of positions which may be held by
any person for each month across all markets subject to the jurisdiction of the Commission

The Government is going to create a commission with 7 long-term and 7 short-term commercial hedging companies, 4 non-commercial participants, and representatives of the appropriate exchanges. This commission will determine "bona-fide" exemptions to the trading of emissions futures:

The Commission shall have exclusive authority to grant exemptions for bona fide hedging transactions and positions from position limits imposed under this Act on energy transactions.

So there, you big and nasty speculators. Gotta be "bona fide" to participate, meaning...closed market. Not good: this means that between long-term and short-term hedging companies and the representatives of the exchanges, market makers will determine who is "bona fide" and who isn't.

In other words, a closed market. Got news for you: these generally do not work out well, as oligarchical and olipsonical markets tend to be overpriced and collusive.

And who is bona fide?

...represents a substitute for transactions made or to be made or positions taken or to be taken at a later time in a physical marketing channel; is economically appropriate to the reduction of risks in the conduct and management of a commercial enterprise; and arises from the potential change in the value of assets that a person owns, produces, manufactures, processes, or merchandises or anticipates owning, producing, manufacturing, processing, or merchandising; liabilities that a person owns or anticipates incurring; or services that a person provides, purchases, or anticipates providing or purchasing; or reduces risks attendant to a position resulting from a transaction that was executed ... opposite a counterparty for which the transaction would qualify as a bona fide hedging transaction...

In other words, no speculation. None, zilch, nada.

Now, of course, there's a role for speculators: they keep markets honest.

The real hoot starts on page 890: the government wants detailed swap information on:

the number of positions and total notional value of index funds and other passive, long-only and short-only positions (as defined by the Commission) in all markets to the extent such information is available; and data on speculative positions relative to bona fide physical hedgers in those markets to the extent such information is available.

Okay, there are the weasel words "to the extent such information is available" that let most folks off the hook: otherwise, it's a real funny. And it's supposed to happen within 60 days of this Commission setting up the rules.

This would be, in a perfect world, fabulous. And yes, I want a pony. No, a unicorn!

Oh, and the regulator for this? The Fed.

Next is a big section on limiting the availability of credit default swaps (CDS) to those with "legitimate" reasons, ending speculation and naked CDS.

Now, on to Title IV: Transitioning to Clean Energy Environment

First of all: Real reductions on industrial emissions.

Second of all: not just in the US.

Now, the first is clear. Well, maybe not, but we can imagine what that means (or more accurately, we'll get into that in a moment).

What about the second? Page 925 here:

NOTIFICATION OF FOREIGN COUNTRIES.—Not later than January 1, 2020, the President shall notify foreign countries that an International Reserve Allowance Program, as described in subpart 2, may apply to primary products produced in a foreign country by a sector with respect to which the President has made a determination under section 767(b) that 70 percent or less of the global output for the sector is produced or manufactured in countries that have met one or more of the criteria in that subsection.

What the?

Okay, jumping forward to Subpart 2:

prohibiting the introduction into interstate commerce of a primary product without submitting the required number of international reserve allowances in accordance with such regulations, unless the product was produced by a covered entity under this title, or by an entity that is (or could be) regulated under this title.

So, let's understand the international implications:

The Government will set up this "International Reserve Allowance Program" (IRAP), in which the President determines what that country may sell to the US by telling them they can't unless they have complied with US regulations on this.

Cool. Massive extension of extraterratorial rights, really massive. This means that if our trading partners don't follow the rules of how we have set up the game, tough titty: you can't sell to us.

Boy, that's going to go over well with everyone.

What is exactly detailed?

The Administrator shall establish the program under paragraph in a manner that addresses, consistent with international agreements to which the United States is a party, the competitive imbalance in the costs of producing or manufacturing primary products in industrial sectors resulting from the difference between the direct and indirect costs of complying with this title; and the direct and indirect costs, if any, of complying in other countries with greenhouse gas regulatory programs, requirements, or export tariffs, or other measures adopted or imposed that are related to the reduction of greenhouse gas emissions.

In other words, if a country has comparative advantages because, oh, say like Austria 90% of its electricity is generated by water power, then the US will compensate the "competitive imbalance" when a US company doesn't have access to such.

Boy that's going to go over well: can we say subsidies, boys and girls?

Subsidies, for whatever reason - and I really do mean this - are always a bad thing. Always. They distort and destroy markets and lead to massive inefficiencies and overwhelmingly result in the exact opposite of what is intended.

But let's go back to what this is designed to do to US industries:

to rebate the owners and operators of entities in domestic eligible industrial sectors for their greenhouse gas emission costs incurred under this title, but not for costs associated with other related or unrelated market dynamics; to design such rebates in a way that will prevent carbon leakage while also rewarding innovation and facility-level investments in energy efficiency performance improvements; and to eliminate or reduce distribution of emission allowances under this part when such distribution is no longer necessary to prevent carbon leakage from eligible industrial sectors.

In other words, the US government is willing to pick up the costs for redoing the industrial base. Isn't that nice for the industrial folks?

Too bad for the taxpayer.

But what is that term: carbon leakage?

CARBON LEAKAGE.—The term 'carbon leakage' means any substantial increase (as determined by the Administrator) in greenhouse gas
emissions by industrial entities located in other countries if such increase is caused by an incremental cost of production increase in the United States resulting from the implementation of this title.

Hmm. What does this mean? Read that several times, and I can't understand it either. Not entirely.

I think it means this: subsidies (rebates in the wording above, but that's semantic) are designed to counteract the effect of foreign companies ramping up their production to meet US demand after US companies drop production because of the effects of this bill. If carbon leakage occurs - i.e. production is abandoned in the US because it is onerous and unprofitable to continue to manufacture such a good - then the US government will ... wave a magic wand? Ah. Design rebates to prevent this.

Like I said, wave a magic wand.

Now, the industries covered: any industry with an energy coefficient greater than 5% (energy costs/total costs); a greenhouse gas intensity of more than 5%; trade intensity of more than 15%. Further, some sectors are singled out: electrical blast furnaces, metal and phosphate production, pipes, etc. Not eligible for anything: petroleum production.

In other words, virtually all industrial activity in the US will be included. Why?

To determine emission allowances.

Now, petroleum production is deliberately excluded: as far as I can tell, they won't get any emission allowances, meaning that they will have to buy them.

In other words, this is the end of petroleum refining in the US.

The emission allowances? The government will determine greenhouse gas footprint in 2012 and 2013 (conveniently ignoring the recession years of 2009-2010) and then start reducing them, with ... 0 percent allowed in 2035. See page 938 for that one.

That's right: no emission allowances after 2035. Zilch. None, nada.

I won't get into the details of how the greenhouse gas footprint is to be calculated, but let's put it this way: it's gonna be a killer.

Now, Green jobs: lots of ways to retrain and fund that retraining. No word about what those folks will do. Lots on providing training for "adversely affected workers", but not much in where the Green jobs will actually come from and actually be.

So, and I'm hurrying now because I want to go to the sauna and sweat some of these absurdities out of my system:


First of all, you're only eligible if you're at or under 150% of the base poverty level (page 1010):

Not later than August 31 of each fiscal year, the Energy Information Administration shall estimate the annual total loss in purchasing power that will result from American Clean Energy and Security Act of 2009 in the next fiscal year for households of each size with gross income equal to 150 percent of the poverty line, based on the projected total market value of all compliance costs (including, but not limited to, the emissions allowances used to demonstrate compliance with title VII of the Clean Air Act in the next fiscal year, and excluding costs that are not projected to be incurred by households as a result of allowances freely allocated and intended for residential consumer assistance pursuant to sections 783 through 785 of the Clean Air Act), in a way generally recognized as suitable by experts.

How? By a monthly energy refund that will lag actual cost developments...

MONTHLY ENERGY REFUND.—The monthly energy refund amount for an eligible household under this section shall be if the gross income of the household does not exceed 150 percent of the poverty line applicable to the household if the household has 1, 2, 3, or 4 members, 1⁄12 of the amount estimated under paragraph (1) for a household of the same size, rounded to the nearest whole dollar amount; or if the household has 5 or more members, 1⁄12 of the arithmetic mean value of the amounts estimated for households with 5 or more members, rounded to the nearest whole dollar amount; or if the gross income of the household exceeds 150 percent of the poverty line applicable to the household, 1⁄12 of the amount (if any) by which the amount estimated for a household of the same size; exceeds 20 percent of the amount by which the gross income of the household exceeds 150 percent of the poverty line.

In other words: hmmmmmmm.

If you're over 150%, you get 20% of the costs back above and beyond; if you're below that, you get the full amount. Or ...

The hell with it. Somebody else parse that one (Page 1015).

But hey, page 1018 says that any processing should be bilingual.


Subtitle D: Exporting Clean Technology

Here, basically, the US will give away the technology and finance the developing countries to, heck, do the right thing and not be such an awful polluter.

What a morass that will be.

Subtitle E: Adapting to Climate Change

This is basically the "Environmental Wacko Employment Act", aka "There Shall Be No Dissent Act", since it requires cooperation and subservience to the Settled Science of Anthropogenic Global Warming.

Oh, and there'll be workshops galore. And advisory committees! Lots and lots of advisory committees!

And lots of subsidies for "education", aka The Truth.

But Indian Tribes shall be exempt. Except they get money.

There's a huge section on land use and the like...and from page 1180 onwards it talks about how everyone, worldwide, needs to be indoctrinated.

Ye Gods.

I wish that some lawmakers had actually read this before the House had passed it.

Ye frakkin Gods...

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