Saturday, April 14, 2007

The Real Cost Of Al Gore's Retirement Plan

The Sunday Times ran a story regarding the unintended consequences of poorly designed environmental policies.

FOOD-PRICE inflation so severe that central banks are forced to raise interest rates to growth-stifling levels; corn prices so high that poor Mexicans can’t afford their tortillas; massive deforestation to make way for more corn and palm oil; poor farmers pushed off their land to make room for carbon-offsetting plantings paid for by rich jet-setters;

Just to name a few.

These are some of the unintended consequences of hastily conceived environmental policies. In America, President George Bush has decided that we can plant our way out of dependence on foreign oil. He envisages a future in which America’s fuel will come from planting above ground rather than drilling below it. In Europe, Angela Merkel and Tony Blair have hit upon carbon trading as the solution to global warming, and the man whose mirror assures him that he is the greenest of them all, David Cameron, has a wind turbine on his roof to generate enough electricity to power his hairdryer.

All these measures are jerk knee responses to a non-problem. There's a saying, "If it ain't broke, don't fix it." Out climate ain't broke, I really doubt if man can break it. But our economies can tank if wrong models propagate wrong business decisions.

Speaking of the Academy Awards, the stars, starlets and wannabes participating in this exercise in self-adulation poured into the hall from their limousines and private jets, but assured us that the entire flood-lit affair was carbon neutral. They had purchased what are known as “carbon offsets”, a system by which they pay others to curtail carbon emissions, or fund renew-able-energy sources. These deals, which are running at an annual rate of about $100m and rising, according to Business Week, “have become one of the most widely promoted products marketed to cheque-book environmentalists”.

The notion of carbon offsets are horrendous. They don't solve anything (there's nothing to fix anyway) and allow a privileged elite to make demands on the rest of mankind that they themselves are unwilling to follow.

Small problem. The offsets were purchased from TerraPass, holder of a portfolio of offset projects, which include a garbage dump in Arkansas managed by Waste Management. TerraPass has purchased thousands of tons of gas reductions resulting from Waste Management’s decision to burn off the methane produced by decomposing trash. But the company’s managers and state regulators told Business Week that the decision to burn off the methane had “nothing to do with TerraPass’s efforts”. Or with the offsets purchased by the Hollywood greens.

Hypocrites. Liars and hypocrites are driving these environmental debates.

There are more such stories, but you get the idea: the reductions in greenhouse-gas emissions claimed by those intent on being green without changing their lifestyles are often bogus — they would have happened without the purchase of offsets.

It's like being on a diet and still bingeing on baked goods and chocolate. You just buy "fat offsets" from starving Sudanese. Then you can state how many calories you've dropped by the number of bony corpses your offsets are producing.

Rich American agribusinesses are also cashing in on the huge subsidies made available by the government’s decision to subsidise ethanol and biodiesel production from corn, sugar and other crops. Ethanol from corn is a particular favourite of all the presidential candidates vying for votes in corn-growing Iowa, with the honourable exception of John McCain, who knows a boondoggle when he sees one. Crop prices are up, and so are land values.

Government subsidies are not free. You pay for them - someone has to pay for all the freebies the government dishes out. It's just that the rich agribusinesses are suddenly paying a lot less. So you, the American taxpayer, have to make up the difference.

The result is a problem for central banks. In the past, spikes in food prices have been seen as temporary, usually weather-related, and requiring no reaction from the inflation-controllers. But this rise might be a plateau rather than a spike: chickens and cattle are more expensive to feed, so farmers are keeping fewer of them, driving up the price of eggs, beef and dairy products. This food inflation is felt most keenly in poorer countries, where food accounts for a larger part of the average budget than in the developed world. But even in the richest countries, central bankers are wondering whether to raise interest rates to cool growth sufficiently to offset the effects of rising food prices.

I keep track of our household finances through a computer program. Our food costs have risen 10% in one year - and we're not suddenly eating steak and lobster. Some of this is due to increased petroleum costs, but we have a daughter living out of the house now We should be spending less, not more.

But think before you legislate. The EU introduced an emissions trading scheme that California intends to copy — and watched greenhouse-gas emissions rise by 30m tons, or about 1.5%, because too many permits were issued. Europe’s four biggest power producers pocketed €8 billion (£5.4 billion) from the sale of their excess permits, and UK generators an estimated £1 billion. That doesn’t mean all such trading schemes are flawed, but it does suggest that haste makes more than a little waste.

What a freaking mess! It's a scam! Nothing was done to reduce emissions. This is a boondoggle invented by corporations and their hand picked politicians to scam more profits for doing nothing. And Al Gore is the leader of the pack.

All the profits realized by those power companies were drawn from other businesses who just ate the cost, right? Wrong! They raised their prices so that you, the consumer, would pay for it. Could this be one of the reasons why energy costs are going up so fast? And yet, with all this fiscal activity, no improvements have been made in the amount of emissions released into the atmosphere.

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