With the Cap & Trade bill dead in Congress, the EPA continues to promote new regulations to control carbon emissions. The left is claiming the moral high ground and the right a new popular mandate, with environmental and energy policy a part of the new political battleground. While House Republicans take aim at federal bureaucrats a number of states, led by California, the left-coast champion of all things green and illogical, are creating their own version of Cap & Trade. Citizens beware, eco-activists are working at the state level to implement cap & trade through the backdoor.

In 2006, California Governor Arnold Schwarzenegger signed the Global Warming Solutions Act that committed the state to cut its greenhouse gas emissions an estimated 25-30 percent by 2020. One of the ballot initiatives buried in the general hoopla of the US midterm elections was Proposition 23, which would have suspended implementation of that law until economic conditions improve. The battle over Prop 23 pitted oil and gas interests against the Natural Resources Defense Council (NRDC) and Democrat activists. In the end, the golden state held true to its environmentalist convictions and voted the delaying proposition down.

Some kind of carbon trading plan, in other words cap & trade, is expected to be part of California's solution to global warming. California’s Air Resources Board has drafted proposed regulations intended to cushion the economic impact on the state’s industries but still accomplish the law’s purpose. They set an initial ceiling on the amount of greenhouse gas emissions allowed in industrial, electricity, transportation and other sectors. That ceiling will be gradually lowered over subsequent years, while the state issues emission allowances that can be traded among polluting industries. The cap & trade rules come to a final vote of the California Air Resources Board (CARB) on December 16.

Those outside of California might say “fine, let them strangle their own industry, perhaps it will move to my state,” but what is little appreciated by the public is that 10 other states have followed CARB's lead in the past: Main, Maryland, Massachusetts, New Jersey, New Mexico, New York, Oregon, Rhode Island and Vermont. Case in point are the requirements that major auto manufacturers build a prescribed number of zero emissions vehicles (ZEVs). Implemented using cap & trade like credits that are bartered among auto manufacturers, this scheme has been in place since 2002.

All this and carbon credits too.

Automakers received full credit for building true ZEVs, like electric or hydrogen powered cars, and partial credit for hybrids and conventional ultra low-emissions vehicles (ULEVs). While this did have the intended effect of getting auto makers to develop ZEVs it also had some curious side effects. Car and Driver magazine reports that electric sports car maker Tesla received a bounty of credits, which it traded to traditional manufacturers like Honda. Reportedly, Tesla made $13.8 million trading its credits in 2008 and 2009. Starting in 2012, the regulations get tougher and only true ZEVs will earn credits.

Interestingly, the new restrictions will exclude the new Chevy Volt plug-in hybrid, though GM is said to be in continuing negotiations with CARB regarding at least partial credit for producing the “augmented electric” vehicle. The Volt will still qualify for the federal $7,500 tax credit for buying a car with a 16kWh battery pack or larger (it is no coincidence that the Volt has a 16kWh battery as required by the federal regulations).

The Volt is perhaps the most important car GM has built in a half century. Despite continued ignorant mispronouncements from the likes of Fox Business Channel air-head Tracy Byrnes, who claimed that GM lied to everyone about the Volt being electric because it had a gas engine (GM has always called it a hybrid), the Volt has been receiving good reviews. Quoting from Car and Driver, not particularly noted for their loving embrace of unconventionally driven vehicles, “this is without a doubt the most important new car since the advent of hybrids in the late 90s, and GM has nailed it.”

Meanwhile, companies are no longer interested in trading carbon voluntarily. Al Gore’s much ballyhooed Chicago Climate Exchange (CCX) has recently announced that it will no longer engage in carbon trading, the activity it was created for. This event has remained strangely un-reported in the mainstream media. “This is an utter failure of purpose in global warming hysteria yet the Old Media is almost completely silent on this colossal failure,” reports Warner Todd Huston of BigJournalism.com.

Market operator Intercontinental Exchange Inc. is laying off staff at the recently acquired Exchange, industry sources told Reuters, the company blaming the action on a lack of US action on climate change. The real reason that the CCX has failed, of course, is because the world has recognized global warming for the scam it is. On the Watts Up With That web site, Anthony Watts posted a chart of falling carbon credit prices. From a high of over $7 in mid-2008, prices now hover at around $0.10.

CCX carbon credit prices have cratered.

This free-fall echos tumbling prices on the European Climate Exchange (ECX). According to a UK Parliament report, the European cap & trade scheme is failing to deliver vital green investment after a collapse in carbon prices magnified by the recession.The price of carbon was expected to rise to €100 a ton of CO₂, or higher, in order to drive urgently needed investment in green technologies and energy efficiency. Current prices, which remain nearer to €15 a ton, are too low to generate the required level of investment. In fact, things are looking dim for alternative energy all around the globe.

This blog previously reported on top Danish wind manufacturer Vestas announced closing of five turbine manufacturing plants and laying off 3,000 green workers. IEEE Spectrum reports that Britain's cash strapped government has canceled plans for a gigantic tidal energy plant on the Severn estuary, north of Wales. Back in the US, Pacific Gas & Electric has announced it's ditching, at least for now, a 5 MW tidal energy project that had been slated for the coast of Humboldt County in northern California. The utility cited excessively high investment costs—including $50 million just to cover transmission infrastructure—and absence of any potential for physical expansion as explanations for the decision.

While the prospects for a cap & trade bill at the federal level are slim to none, it is an idea that refuses to die. Led by California, a collection of states may very well be in the process of establishing cap & trade via the backdoor of local legislation. It is often said that one of the strengths of the US federal system is that each of the 50 states serves as a laboratory to try out different solutions to the nation's problems. That is obviously not the case when a fifth of the several states abrogate their sovereignty and play follow the leader behind the granola state. Pusillanimous politicians in these states have proven themselves to be deeply, spectacularly unimaginative by adopting CARB's policies wholesale.

Why are politicians so enamored with these Enronesque cap & trade schemes? Perhaps because they are driven by market forces too complicated to be understood by politicians or their constituents, or maybe because the name doesn't contain the word “tax.” The motivation for environmentalists is easier to discern—cap & trade, effectively enforced, strangles industry. As we said in The Energy Gap, there are rational ways to significantly reduce carbon emissions and they are side effects of enhancing energy security and reducing real pollution. As has been seen in Europe, and now in America, cap & trade is an unworkable idea no nation can afford, whether it comes at the national level or through the backdoor.

Be safe, enjoy the interglacial and stay skeptical.

Cap & Trade: the most effective path to poverty.