Wall Street Wins with Cap-and-Trade, Consumers Lose

Posted May 11, 2010 | folder icon Print this page

Washington, DC – As Senators John Kerry (D-Mass.), Lindsey Graham (R-S.C.) and Joe Lieberman (I-Conn.) prepare to unveil their much-awaited global warming legislation, many Americans find themselves wondering who will benefit from the proposal. Well, after a quick search of newspapers from the past few years, it’s obvious who wins and who loses: Wall Street wins, consumers lose. Following are a few selected articles that paint an abundantly clear picture of what’s at stake and why specific rent-seeking corporations are aggressively lobbying for implementation of energy rationing legislation.

It’s also important to note that while this trio of senators has been working for months—over six to be exact—behind closed doors with many of the companies and trade associations mentioned below, the American consumer, who will inevitably foot the bill through higher energy and electricity prices, was absent from the negotiating table.

While Sens. Kerry, Graham and Lieberman have publicly distanced themselves and their legislation from the House-passed Waxman-Markey legislation, their proposal, at its core, will achieve the same goal: it will artificially increase the price of coal, oil and natural gas through added legislation and regulation.

Exelon, the nation’s largest nuclear power company, stands to rake in roughly an extra $1 billion to $1.5 billion a year if the House climate change bill passes, according to the company’s own estimates. The House is expected to vote on the bill on Friday… Exelon CEO John Rowe recently told a gathering of investors and senior executives that the energy bill “will add $700 to $750 million to Exelon’s annual revenues for every $10 per metric ton (MT) increase in the price of CO2 allowances.” Prices will range between $15 and $18 per metric ton, the report estimates, “implying a positive earnings impact of $1 to $1.30 per share.” (Huffington Post, 7.24.09)

Banks: Gearing Up for Carbon Trading…while U.S. policymakers continue to squabble over the details of the “cap-and-trade” proposal, big banks are gearing up for what they see as a new profit center. “U.S. carbon trading is coming,” says Louis Redshaw, head of environmental markets at Barclays’ (BCS) investment bank. “You have to be in it to win it.” Analysts figure rules will be in place by 2013, and carbon trading could top $1 trillion a year by 2020, according to research firm New Carbon Finance. At that size, carbon would rival oil as one of the largest commodity markets… The biggest banks in the U.S. and Europe are quietly preparing for the potential payoff in trading. France’s Société Générale (SCGLY) has set up a U.S. group devoted to carbon. Morgan Stanley, which already is active on the U.S. regional exchanges, says it will expand its unit once policymakers finalize the rules. (Business Week, 5.28.09)

Behind the Green Doerr… In essence, Doerr is helping to create the biggest new market the world has seen since the dawn of the oil industry—and asking for taxpayer dollars to do it. Doerr regularly trots out chum Al Gore to run through his Inconvenient Truth slide show in front of influential audiences of businesspeople and politicians. Doerr has an unlikely solution to the tech-bubble problem: He denies there ever was one. “People think of it as a bubble,” he says, gesticulating enthusiastically. “I prefer to think of it as a boom. The payoff on some of these innovations was longer term.” Asked if greentech could repeat the dotcom crash, Doerr admits, “It’s possible.” He pauses and rubs his forehead before repeating, “It’s possible.” Kleiner Perkins partner Ray Lane… goes further. “A bubble? You can almost count on it…” “Bubbles are common. They end badly for those who come in late. For those who come in early, it’s not that bad.” But he predicts that alternative energy will get overheated and others will undoubtedly go up in flames. “If the bubble develops out of a whim,’’ he says, “then shame on investors. They need to get burned.” (Forbes, 4.16.07)

Chemical Makers Poised to Gain In New Cap-and-Trade System… DuPont Co. expects that by 2015 its sales from renewable materials that displace fossil fuels will nearly double to $8 billion. That could include sales of ethanol made from corn cobs and switchgrass that the company is developing in a joint venture with food-ingredient company Danisco AS. German chemical maker BASF SE sees big business opportunities in the weatherproofing of residential homes, which typically contain an average $17,000 worth of chemical products, according to the chemistry council. There’s room to raise that to up to $30,000 per house, says BASF. Among its weatherizing products: tiny wax-filled capsules that can be embedded in plaster, wall board and insulation. The wax absorbs heat when it melts and releases it when it solidifies. (Wall Street Journal, 6.5.09)

Industries Hope for a Feather in Their ‘Cap and Trade’ Emissions Plan… Robert Stavins, a professor of business and government at Harvard University, said a cap and trade program would be fantastic for GE and other companies that sell products that consume power. He said that if energy costs go up as a result of the regulation — something he believes is likely — a wide array of products from appliances to power plants would become prematurely obsolete and need to be replaced with greener models. (Politico, 2.28.07)

One major group of recipients of the free money being given to industry in the form of carbon permits are the electric utilities, represented in Washington by the Edison Electric Institute. Along with the coal and steel businesses, the utilities are positioned to receive a huge portion of the carbon permits — some of which will be disguised as measures for consumers — and have become one of the nation’s highest-spending lobbies, working to ensure that their interests are served by cap-and-trade. (National Review, 7.2.09)

Rio Tinto to Congress: Get going on carbon pricing… Not only is Rio Tinto concerned about higher costs for energy required to run its business, but it also sees opportunities to sell more commodities, such as copper and aluminum, that could be used in climate-control technologies. (Salt Lake Tribune, 4.12.10)

Imagine a Google executive demanding a tax on software, or General Mills asking for a tax on wheat. That’s where we now are in the U.S. auto industry, with Ford CEO Alan Mulally believing he has little choice but to seek a tax on the very fuel that powers his products… Michael Jackson, CEO of AutoNation, the largest auto dealer in the country, was more explicit: “Mr. Mulally said it very elegantly last night and I will say it more straightforward. We need more expensive gasoline.” He figures a tax that guarantees a gas-price floor of $4 a gallon is a “good start.” Mr. Mulally, for his part, talked about how good Ford’s sales of small cars were in Europe, and that “one of the reasons is that gasoline and diesel is somewhere between seven and nine dollars a gallon.” So: The U.S. government mandates fuel-economy standards that force Detroit to make cars Americans don’t want to drive. When Detroit loses money on those cars, Washington throws taxpayer dollars at its mistake, and the car makers demand a tax increase that would prod Americans to buy the unpopular cars that Washington mandates. As for what the American consumer or taxpayer wants — or can afford in today’s economy — who cares? Welcome to government-run energy policy. (Wall Street Journal, 3.17.09)

Randy Zwirn heads Siemens Energy Americas, part of a 19 billion euro revenue business that accounted for 25% of the German conglomerate’s revenue in 2008. Siemens Energy’s fortunes are intertwined with the development of the global green energy industry, and often hinge on government policy that would support the development of renewable energy. Siemens produces wind turbines, photovoltaics and has developed a new generation of efficient large natural gas-fired turbines, in addition to its coal-fired generation and nuclear businesses. (Forbes, 6.11.09)

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FOR IMMEDIATE RELEASE:
May 11, 2010
CONTACT:
Patrick Creighton: 202.621.2947
Laura Henderson: 202.621.2951

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