What the Lieberman-Warner Climate Change Legislation and the Selling of Indulgences Have In Common

iron-and-globe.jpgIn the grand tradition of the savings and loan debacle of the 1980s, the mortgage-backed securities meltdown that currently threatens to undermine our financial markets, NAFTA, GATT, and the invasion and occupation of Iraq , our leaders in the Senate are once again preparing to hoist upon an unsuspecting public another catastrophe in the making.

I am referring to Senate Bill 2191, America ’s Climate Security Act. This insidious piece of legislation crafted by Senators Joe Lieberman (I-Conn.) and John Warner (R-Virginia) and lined with ways for the most clever and unscrupulous among us to make “big bucks” includes the:

  • Establishment of a greenhouse gas (GHG) registry and a GHG emission allowance transfer system for covered facilities, including specified facilities within the electric power and industrial sectors and facilities that produce or entities that import petroleum- or coal- based transportation fuel or chemicals. Sets forth emission allowances for 2012-2050, with a declining cap on GHGs;
  • Selling, exchanging, transferring, submitting, retiring, or borrowing of emission allowances;
  • Distribution of emission allowances;
  • Establishment of the Climate Change Credit Corporation to auction emission allowances;
  • Establishment of an international reserve allowance program.
  • Requirement for the proceeds from sales of such allowances to be used to mitigate the negative impacts of climate change on other countries’ disadvantaged communities;
  • Requirement to study the feasibility of the construction of:
    • pipelines for the transportation of carbon dioxide for sequestration or enhanced oil recovery;
    • and geological carbon dioxide sequestration facilities.

So what is wrong with the above you say? Aren’t “Cap-and-Trade” schemes designed to force polluters to reduce GHGs a good idea? In a word – “NO!”

I believe Frank O’Donnell, President of the Not-for-Profit Clean Air Watch, phrased it best when he said, “It’s a lot like the medieval practice of buying papal indulgences. If sinners throw a few bucks into the pot, they can go back to sinning.” This way companies that still belch GHGs can appear green by purchasing offsets such as carbon financial instruments and Renewable Energy Certificates (RECs).

Look folks, I am a true believer in global warming and believe the window to do something about it is very narrow and we have to kick into high gear NOW. But this legislation will ultimately do nothing to get us to where we need to be by 2050. In a way, it’s like invading Iraq on the premise of fighting the global war on terrorism. (How stupid and misguided was that!)

Currently, it is estimated that the market created by trading and swapping credits and RECs is estimated to be around $200 million. If Lieberman, Warner, and their cronies get their way it could reach $4 billion. Wow, that’s a pie you want to get a slice of isn’t it!

In a very simple scenario ABC Company decides to reforest some area of the world in order to appear “green.” ABC Company claims the planting of the trees, will help to lower carbon dioxide and offset the GHGs they emit into the atmosphere. So essentially what is going on is we are “securitizing” trees. (Sound familiar, after all we securitized home loans and see where that got us.) The question I have is what is the value of tree? If it is now a security, how long can it be held? What is the life of a tree? When does the value a tree begin to decline? How will that look on a balance sheet?

I can see it now. Initially there will be a high demand for these credits and that demand will drive up the price of trees, swamps, tulips or whatever is being securitized. Then the inevitable fall will come. The value of the securities will crater and corporations will be writing down the losses and trying to explain to their shareholders why they were stupid enough to by a 20 acre forest in Tanzania that was also purchased by another company at the same time.

Moreover, companies that demonstrate they have lowered their emissions can then sell those credits in this market to the folks who are still polluting. It reminds me of the story of the Potemkin villages. These were fake settlements erected at the direction of Russian minister Grigori Potemkin to fool Empress Catherine II during her visit to Crimea in 1787. According to this story, Potemkin, who led the Crimean military campaign, had hollow facades of villages constructed along the desolate banks of the Dnieper River in order to impress the monarch and her travel party with the value of her new conquests, thus enhancing his standing in the empress’s eyes.

The Act also sets yet to be determined allowances for emissions starting in year 2012. Businesses will be required to reduce their emissions a certain percentage from the previous year. My question is how is that baseline year established?

In addition, the proceeds from SB 2192 will be used to fund “low carbon” energy technologies such as “advanced coal and sequestration technologies programs.” This is a significant windfall for coal plant operators. Although I and most Americans won’t see any benefit from this Act, the owners of coal plants sure will. Although, come think of it, it might be a smart move to buy some old abandoned mine shafts and lease them as places to sequester carbon dioxide. . . . that’s the ticket!

kevin_lynn.jpgIn closing, there is so much we could be and should be doing to lessen the impact we are having on the environment and making America energy independent. But SB 2192 is not going to help accomplish any of that. I believe Caltech professor Nathan Lewis said it best, “the Stone Age did not end because we ran out of stones, and fossil-energy age is not going to end any time soon because we’ve run out of cheap fossil fuel. Don’t wait for that to happen.” We must foster markets wherein renewable energy sources such as wind and solar thermal can come to scale and compete. This will not happen with SB 2192.

— By Kevin Lynn

Delegate and Member Executive Board,
California Democratic Party


  1. says


    Your thoughtful comments are too charitable. Life is shorter and simpler (i.e. more brutal) than we would like.

    In particular, what you say about Lieberman-Warner is true of all cap-trade global warming legislation – indeed most legislation generally!

    The legislation is the easy part. Lack of globe-wide enforcement (e.g., as you noted, enforcement against multiple sales of Tanzanian forests, or other enviro versions of the Brooklyn bridge) is the tough part. Most govts in the world don’t even reliably enforce their OWN EXISTING laws, esp. for enviro protection.

    [Esp. because they are oligarchies, e.g. like our own elected oligarchies, or even tyrannies – and hence are readily corrupted per Lord Acton 1887: ‘power tends to corrupt and absolute power corrupts absolutely’.]

    So the real global warming challenge is establishing an accepted and globally effective enforcement system – equivalent to the police part of a world govt. At the very least, that means a lot of 24/7 surveillance and as instant as possible punishment of violaters. Something we have yet to see in response to any actual or envisaged threat to planetary security or prosperity. Certainly not now in response to pollution in the USA or China, or to genocide in Sudan.

    As soon as you have ‘trade’ and not just ‘cap’, enforcement truly has to be global, and detection and punishment real-time swift. Otherwise you can get Enron-style churned trades that will quickly befuddle regulators as to who and when has how many credits to do what.

    Even assuming real enforcement, credible cap-n-trade award of initial pollution credits is very problematic. Simple initial grandfathering would just give windfalls for deliberate inefficiency and deferred efficiency. Some interim pollution uses are more justified than others, but based on precisely what rationale?

    The Second Law of Thermodynamics strongly suggests that it will be far more productive to use any energy source (renewable or other) directly, than to use it indirectly, i.e. to sequester carbon resulting from combustion to produce energy. Ergo, one would expect that the most economical approach to carbon sequestration from fossil-mineral combustion is to leave the minerals alone and not combust them. Therefore, radical as it sounds in terms of what we are used to and assume necessary today, the least economically painful approach to use of coal, oil, etc. will soon be not to use them at all. I know that this view sounds spoilsport and simplistic, but have you actually seen any credible analysis to support otherwise – even from Amory Lovins?

    With or without cap-n-trade law – and especially because of the lack of enforcement, plus the ambiguities and cheating you noted that are involved in securitizing trees and the like – the concept of carbon offsets is indeed papal indulgences deja vu.

    (At my website joeweinstein.info, some months ago in one of my opinion pieces – ‘heated opinion’ – I too could not help noting this.)

    Al Gore may rationalize carbon offsets for his own family – just as Jefferson rationalized keeping his own slaves. I respect both men for their general contributions and campaigns, even as I must profoundly disagree with these aspects of their personal behaviors.

    • Kevin Lynn says

      Hello Joe,

      Your comments on leaving the minerals alone and mentioning Al Gore’s rationalization of Cap-and-trade policies made me think – hey, isn’t he one of the bigger contributors to this problem?? He sliced and diced Ross Perot in the NAFTA debate and now whole industries that were once regulated by the EPA are now polluting without restriction in China, Indonesia, and the Phillipines just to name a few. Prior to the 1970 only the US and Europe were the big oil consumers. Now it is all of Asia, Latin and South America, Europe and the US. Our greed has created quite a mess.


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