Charged Conversations - Cap And Trade, England without coal, and energy economic growth

Episode Transcript

Speaker 1 (00:00):
You're listening to charged conversations, and I'm your host, Brigham mccount.
This week's episode, we're going to take a look at
Washington States captain trade program, and then second we're going
to take a look at England without coal, and last
we're going to compare economic growth between the Eurozone, certain

(00:21):
European countries, and the United States. Three years ago, Washington
State lawmakers passed a pretty significant climate law which was
championed by the governor, positioning the state as a leader
in climate initiatives. The act was called the twenty twenty
one Climate Commitment Act, and what did it do well.

(00:44):
It introduced the statewide cap and Trade program, requiring businesses
to acquire allowances for greenhouse gas emissions. So you may
ask what is cap and trade Anyway, it's a term
that we've actually heard about, and one of the ways

(01:08):
that I can describe it is that it's a system
for controlling carbon emissions and can be used for other
types of atmospheric pollution by which an upper limit is
set right for in this case in the state of Washington,
and then that amount is dolled out between the businesses

(01:29):
or other organizations, industries and that's the max you can produce.
But it allows a trading scheme to be set up
where if you don't need all of your emissions, but
maybe I need more, I can buy extra credits from

(01:51):
you to use for me. That's the trading part. The cap,
like I mentioned earlier, is that upper limit set by
the state, in this case Washington State, on how many
greenhouse gas emissions can be released into the atmosphere in

(02:12):
the state of Washington, largely designed for carbon dioxide as
well as other greenhouse gases, and the point behind it
is to limit climate change by creating a market with
limited allowances for emissions. And you may say, well, wait
a minute, Okay, who comes up with this cap? Ah,

(02:34):
this carbon cap? Well, politicians do, right. We say, well,
let's see to meet our twenty to fifty climate goals,
we would have to reduce x pollution greenhouse gas emissions
from the world. Let's divvy that up somehow, either by

(02:56):
person or by our slice the pot, and voil I
here you go. You can't admit more than this in
the United States, in France, in Germany, or in this case,
in Washington State. So that's the upper cap, and presumably
over time that cap would be further reduced. You're like, okay,

(03:20):
but what if I need more? Well, okay, yeah, you
can trade. You can find somebody that's not using THEIRS.
Well what if everybody is using theirs, Well, then you
are out of luck. You're going to have to shut
down your business or ah. You simply need to find
a way to produce whatever it is you're producing and

(03:43):
put let less simple. Really right, you keep doing your business,
but you just have to get more efficient. And this
cap on greenhouse gas emissions is a firm limit. The
Environmental Defense Fund says what I just mentioned earlier, that yeah,
the cap gets stricter over time. We're going to continue

(04:04):
to raise the bar. In this case, lower the bar,
lower the emission's maximum. And the trade part is again
that market for companies to buy and sell allowances them. Allegedly,
this whole system gives companies incentives to save money by
cutting emissions in the most effective way. Okay, And the

(04:26):
proponents of this say that cap and trade is lowering
emissions globally and that other countries are doing this. In fact,
I found an article that talked about China being the
world's largest greenhouse gasometer something We know very well that
they launched an initial phase of a carbon national carbon
market in twenty seventeen with help from the Environmental Defense Fund,

(04:50):
something you haven't heard about in quite a few years.
And my personal view is because they're not serious about it.
We'll come back to China minute, but let's resume. So
the idea is that this year election that's coming up,
a very important election for many different reasons. Key take

(05:11):
away from this twenty one Climate Commitment Act is that
Washington State voters will be able to vote against this
law because what's happening. What have they figured out in
Washington State? Well, this bill that indirectly levies a carbon
tax on energy has resulted in energy prices skyrocketing through

(05:36):
this cap and trade program. And even though Washington State,
i think, is considered one of the poster childs for
left of center states, consumers don't like paying more or
energy or for inefficient government. So it is on the
ballot now that the voters will be able to vote

(05:59):
against this. And you know, when you talk to some
other folks, they simply say that cap and trade schemes,
environmental schemes like this make energy more expensive and limit
consumer choices, and I guess that's the real big question,
right does it help or hurt the economy? And can

(06:22):
we have both? Right, Because proponents of environmental reforms have
been suggesting that oh no, no, no, no, renewables are cheaper,
they're getting cheaper, They're cheaper every day, They're now on
par with fossil fuels. This is great, no problem. Well,

(06:42):
since January twenty three, just in the last year, less
than two years, this cap and trade program in Washington
State has in fact generated over two billion dollars from consumers,
which the state is now channeling into funding clean energy,
public transit, energy efficiency, and climate adaptation projects in communities.

(07:06):
While the law aims to help Washington meet it's voluntary
climate targets, and let's see what that is. That's having
greenhouse gas emissions by twenty thirty having in just a
few years and eliminiting them by twenty fifty, it comes
with rising costs for consumers. Essentially, these type of programs

(07:28):
function as hidden taxes, covering seventy five percent in this
case of Washington State's admission, and it operates alongside other
programs aimed at reducing emissions, so consumers are facing multiple
programs that have been increasing the cost of fossil fuel
products in this pursuit of Washington State's environmental goals. One

(07:50):
of the common fallacies here is, oh, don't worry, the
big greedy corporations are going to pay for that, all right,
And there are some corporations we have a lot of money.
We all know who they are. But it ignores one
of the fundamental concepts of economics, and that is the
cost of doing business, the cost of regulatory compliance, the

(08:16):
cost of raw materials going up, the cost of salaries
and labor going up, is not absorbed by the company
to the maximum extent possible. It's passed on to consumers. Look, folks,
there's no money tree out back right. I mean, oh yeah,

(08:38):
I need another billion dollars. I'm just going to go
out in my backyard and pluck some Ben Franklin's off
the tree, and a lot of Ben Franklin's case of
billion dollars. But the point is, no, that is not
how it works. Now. I'm not here to tell you
that all of the inflation we've seen over the last
several years is cau buy things like a cap and

(09:02):
trade or environmental compliance it's caused by the government printing
too much money and the other side of the government
spending too much money. But when you zero in on cars,
for example, cars are automobiles most expensive. They have been
adjusted for price. Ever, right, automakers are scrambling to meet

(09:25):
their green target goals. They're losing their shirts on evs
by the day. And yeah, we're all paying to subsidize evs,
which is why automobile new car automobile prices are up
over twenty five percent and just the last four or
five years. Now, there are other incentives, right, the government

(09:45):
gives out incentives for people purchasing environmentally green products. But
in essence this type of government intervention government regulars voluntary laws,
even they increase the costs in order to steer you

(10:07):
to a certain direction. The backers of the repeal vote
in Washington State, and I'll admit taking a look at
it looks like that includes industry interests. So it took
Washington State more than a decade to put this price
on carbon pollution, and the efforts again or to make

(10:29):
corporations pay for and after a string of initiatives and
state legislature just didn't pay off. So it was a surprise,
I think, when the legislature passed this in twenty twenty
one and they used the nineteen ninety levels in order
to determine what it would be to slash it by

(10:50):
fifty percent. Even more surprising, perhaps, is that BP, the
same oil giant that we know out there, supported the measure,
and other groups such as the Western States Petroleum Association,
which represents oil company interest including Excellent, Chevron and Shell,

(11:12):
have also supported keeping the program. Strange Now, I'm not
sure exactly why that is, and while the Western State
Petroleum Association was originally for the bill, they're not backing
the repeal. It doesn't mean that oil companies are happy
with the current program. And one of the reasons I

(11:34):
think is because these auctions for emissions, well, by the way,
you have to buy these emissions credits, have not yielded
the money that folks thought they would, so eliminating the
cabin and trade program would rip a five billion dollar
hole in the state's transportation budget over the next four

(12:00):
five years. And really, I think when we look at
a lot of these programs taxes to have this kind
of car cap and trade programs, they're all designed to
raise revenue. Now, I'm not saying they're red light cameras
or speed cameras, but it seems that way sometimes, doesn't it.

(12:20):
So is the issue in the case of speed cameras
and red light cameras is the oh, it's all about
safety Now it's not, it's about revenue. Could we be
onto something here? In conclusion, I guess the status of
Washington's signature climate laws at risk due to this upcoming
ballot initiative. And this initiative would stop the ban on

(12:41):
affordable and reliable fuels, especially natural gas, and would repeal
the cap and trade program. Vote yes and pay less,
is what they're saying now. Meanwhile, over in the United Kingdom,
they celebrated a milestone this week, the country that first

(13:02):
learned to use coal says they've kicked the coal habit.
That's right. The United Kingdom turned off their last coal
fired electric generating facility and they are totally off of coal.
This was met with a lot of fanfare and a

(13:24):
lot of excitement. But if you see this on social media,
what they're not telling you is this, how are the
UK's electric prices going? Answer? Not good? Not good. The
UK has done something that people didn't think could be done.
And that is they have surpassed Germany for having the
highest electric prices in the industrialized world. Congratulations, oh and

(13:50):
eighty percent above the industrialized nation's median and more than
three and a half times the price in Korea and
a little over three times the price of electricity in
the USA. Now, imagine, just at home, if your electric
bill tripled next month, that would put a dent on

(14:10):
the money that you have to spend on anything. Right,
money is not going to flow into the economy when
you're just trying to pay your bills. Imagine if you
were a retiree, could you absorb it three times exponential
rise or more in your electricity prices? Of course not,
So that is that is crazy. And it's not gas

(14:34):
that's the main driver of such relatively high electric prices,
because UK natural gas is actually lower than France and Germany.
So the takeaway is this, how on earth can you
continue to grow an economy when energy is doubling and

(14:54):
tripling in price? Spoiler alert, You can't, right, We've said
this before. Or if you look at what's to make something,
what's the number one cost of building something in a factory?
For an industry. Okay, in some places it's raw materials.
That's number two in our case because number one or people,

(15:17):
people cost number two raw materials. Number three energy. If
your energy prices are going up such that you are
increasing the cost, it makes it cost to make anything
being John Deere tractor, fertilizer, even services, cars, automobiles, whatever

(15:41):
it is. You're less competitive in the world. We have
seen this with Germany where they have seen a significant
amount of de industrialization of their heavy industries and factories
ball bearings, glassware, farming implements, and even making fertilizer, ammonia nitrates.

(16:04):
That story kind of thing, because it's just too expensive.
How on Earth can any country in this case we're
talking the UK avoid massive de industrialization when its energy
prices are three times out of the US and fifty
percent above the median of their competitors. Seriously, wow, So

(16:28):
open AI is considering five to seven gigawatt data centers
throughout enough to consume all UK electricity generation. Do you
think that a country that has the most expensive electricity
in the industrialized world is going to attract new industry

(16:48):
going to attract data centers AI centers that require massive
amounts of energy. No, it's not going to happen. And
I think that's why for years you've talked about Europeans
not looking at energy from an abundance standpoint. They've looked

(17:09):
at it from a source of scarcity. Oh, we have
to have better efficiency, higher fuel standards, we need to
insulate our homes better. All of this is designed to
use less, not more energy. And when you operate from
an energy scarcity mindset, you're going to be poor. Spoiler alert,

(17:32):
there are no energy poor countries that are wealthy don't exist.
It does not exist. So all these programs to winterize,
to reduce the amount of energy used, buy a more
efficient dishwasher, they are not rational at improving efficiency. It's
all about the mindset of energy scarcity. Especially when we're

(17:57):
talking electricity, they don't work. We need substantial more, not less,
investment in energy. And because of the amount of energy
that's going to be required, you know that band aid's
getting ripped off folks with all this new tech and

(18:18):
other aspects. We need significant more forms of energy that
I think will bring to light once and for all.
What sources of energy can make this happen, and which
sources of energy either can't make it happen, or can't
make it happen twenty four to seven, or can't make
it happen at a price point that people can get.

(18:41):
So look, if we step back from all this and say, oh, okay,
we should be cutting down on harmful pollution. Yeah, and
the good news is that US air is cleaner than
at any point since the Industrial Revolution. And that's awesome.
That's the best since we've been keeping records. Remember we
used to talk about greenhouse cows gas emissions GHG emissions,

(19:06):
but now we're only talking about CO two. Why well,
because we've gotten pollution generally under control, and we should
continue to move in that direction. But remember, the Cuyahoga
River has not caught fired a long time. You can
actually see your face and hand in the Ohio River,

(19:26):
our creeks, streams, forests cleaner than they've ever been. Big
city air quality much better than it's been. Great. We
should have the public goal and to cut harmful emissions
and to ensure that we continue to improve air and
water quality. If that's the goal, If we can all agree, hey,

(19:46):
we want cleaner air tomorrow and we have today. We
want clear water tomorrow and we have today. Yeah, then
those are the rules, and now let the private sector
innovate and figure out the best of roach for reaching
those objectives. In other words, the government a not the experts,

(20:07):
be supposed to be the referees in a private sector economy.
Meaning it's like a soccer game or a football game.
Set the rules, call out people that aren't playing by
their rules, otherwise stayle away. And so the issue is
that they're not just enforcing the rules from a performance

(20:33):
based metric. Hey, here's our goal. You guys, figure out
how to do it. They're saying, No, this is how
you're going to kick the ball. This is how you
have to pass the ball. This is how you can't
pass the ball. It's too many rules. The government is
intended to be these non biased referees, and the issue
here is that we have politicians, technocrats and bureaucrats who
don't want to do that. They actually want to tell

(20:54):
us exactly how to achieve these objectives, and by the way,
using outdated technology, outdated standards, and outdated best practices. When
the government tries to control an industry or the economic engine,
the world has always, without exception, seen mediocrity, scarcity, and

(21:20):
an overall sense of malaise. This top down approach discourages innovation,
it discourages work. Look at any socialist country and when
you hear somebody say I'm going to give you X
dollars and I'm going to force X, y and z,
that's code for trying to control the market. Don't fall
for it. And finally, the Fitch Rating Service, which is

(21:42):
a significant to economic rating service. How the UK just
released report on US economic growth and doing pretty well.
Fourth quarter last year grew by zero point eight percent,
that's three point three percent, and it looks like that
is continuing to go. Now what's interesting is the UK's

(22:06):
GDP declined, with private and public consumption and exports weighing
down growth. Germany's economy also contracted as export shrank on
a quarterly basis for the fifth consecutive period. The Eurozone
as a whole, all of Europe was flat, flat, America growing,

(22:27):
Europe stagnating. Think about that. You've been listening to charge
conversations a Joe Strucker production. Now I'm your host to
brig him an account. We'll see you again next time.