California counting its carbon tax riches

Katy Grimes writing at CalWatchDog:

While the rest of the country shuns carbon trading schemes, California politicians continue to embrace the concept, and are forging ahead with a Cap and Trade carbon trading system. But eight states have dropped out of California’s Western Climate Initiative, leaving many scratching their heads in wonderment, as only California and Quebec are left alone to solve the world’s global warming and climate change issues.

But instead of being a real innovator and helping businesses sincerely lower emissions, California looks as if it is desperately clinging onto the notion that we can lead the rest of the world in controlling climate change, and behaving as a Nation State.

Why Quebec?

Cap and Trade was first concocted by the United Nations as a way to financially benefit from selling carbon offset credits. Vice-President Al Gore was already part of the Intergovernmental Panel on Climate Change, which helped seal the deal in the 1990′s through the Clinton administration’s involvement in the Kyoto Protocol, which mandated that nations reduce or offset carbon emissions.

This scheme must have been irresistible to the California Legislature, which passed AB 32, California’s Global Warming Solutions Act, in 2006. The original plan was to create a giant climate change coalition with other states and provinces from which carbon trading and taxing would emanate. But one by one, states have dropped out, citing the difficult economy and cost to manage such a program.
But not California.

“Linking with Québec is a significant advance in California’s efforts to fight climate change and steer our economy toward a clean energy future,” said CARB Chairman Mary D. Nichols. “Linking provides more options to California businesses and lays the groundwork for other partners to join with us. This sends a strong message to two national governments that now is the time to support innovation, energy efficiency and the development of clean technologies.”

But Quebec is not even a trading partner with California.

Only in California. No, only in a California run by ultra liberals.

Read the rest of Katy’s article HERE

Another CA Business Escaping

Russ Steele

Just heard the news on Channel 13 KVOR, Verizon is moving its Rancho Cordova Call Center to Utah. The business exodus continues as the regulatory environment  continues to grow in California. Why wait for energy cost to go up, move before the California economic crash!

Wrangling for the AB-32 Cap and Trade Slush Fund

Russ Steele

As I have been reporting, AB-32 Cap and Trade was all about creating a tax payer supported slush fund, now our political leaders are trying to figure out how to take control of the AB-32 pig trough.

Details at KQEDz’ Climate Watch: The New Cap & Trade Battlefront: How to Spend the Revenues

AB 32 requires California’s largest emitters to meet carbon reduction targets. If a firm’s emissions are below state-mandated targets, it may auction off its remaining “allowances” to firms that exceeded their emissions targets.

Since the enactment of AB 32 in 2006, California’s greenhouse gas emissions reduction law, analysts have speculated about how to spend the money generated from the law’s cap-and-trade carbon allowance auctions, the first of which is set for this November.

On Tuesday, the State Assembly passed new legislation, AB 1532, that narrowed the options. The bill, which the California Chamber of Commerce has described as a “job killer” and an “illegal tax,” passed 47-26 and awaits action in the Senate. If ratified, it would establish a “Greenhouse Gas Reduction Account” within the state Air Pollution Control Fund and authorize spending auction proceeds on clean energy technology, low-carbon transportation, conservation and green energy research and development.

On Friday, the California Air Resources Board held a public hearing to discuss where auction funds might be spent, as a panel of speakers from across the state and country — representing a broad array of industries and interests — sounded off on where this sizable stream of new funding might be best directed.

Jim Earp, executive director of the California Alliance for Jobs, said that the funds should be spent on improvement of transit networks and infrastructure. Ellen Hanak, a fellow at the Public Policy Institute of California, suggested that a best fit is renewable energy and efficiency projects. Lester Snow, director of the California Water Foundation (and former head of Water Resources for the state), pointed to habitat restoration on the Delta and making California’s vast, energy-intensive water delivery systems more efficient.

The governor’s 2012-13 budget [PDF] also lays out a general framework for where cap-and-trade auction funds might be allocated.

• Clean and efficient energy
• Low carbon transportation
• Natural resources protection
• Sustainable infrastructure development

“These are obviously broad categories,” said air board chair Mary Nichols of the governor’s proposals in her remarks. “No one has yet suggested any precise breakdown or amounts of money to go to specific programs.”

Decisions are being made piecemeal. For instance, revenues from utilities will be returned to electricity customers, though exactly how is still being worked out.

Perhaps it’s no surprise that no one yet knows how California’s auction funds will be spent. There is still debate over whether the funds should be considered a fee or a tax — a legal determination that, under Proposition 26, could potentially limit where money is directed.

And as Climate Watch senior editor Craig Miller reported earlier this month, no one can predict with any certainty at what price carbon will trade in the California market. Most estimates put the figure at between $15 and $30 per metric ton, which means that when the market is fully up to speed in 2015 it could pull in as much as $6 billion a year. (The governor’s budget stated the program could generate as much as $1 billion in its first year.)

As for how cap-and-trade might state boost the state’s economy, Nichols pointed to a recent analysis of the Regional Greenhouse Gas Initiative cap-and-trade system, which includes ten  states in the Northeast. That program has reportedly injected $1.6 billion into the regional economy through such measures as consumer bill reductions and sales of energy efficient equipment.

The period for public comment on carbon auction funds spending (click for online comment form) is open until June 22.

Let them know how you think they should spend the Cap  and Trade Slush Fund

I am shocked, I tell you, shocked

Russ Steele

Well not really, local bloggers  have been reporting for years the budgets coming out of Sacramento are bogus.  Now Katy Grimes writing at Cal Watchdog reports CA debt much larger than reported

“Reports of California’s debt usually just include the $17 billion budget deficit. But California also owes the federal government $14 billion, and public schools $10 billion.

While California sputters under the massive debt, legislators continue to take up ridiculous bills and resolutions, and ignore bills which would begin necessary reforms.”

You can read the whole sad story of inept political leadership HERE. Rather than attempt to solve the budget problems, the Legislature continues to bring forward bills that are strangle the California economy.  The only way out of this mess is to fire up our economy. We have huge fossil fuel deposits on and off shore, and our political leaders insist on promoting higher cost alternative energy, driving business and jobs out of the state to lower cost states and off shore. Time to clean house in Sacramento.

California on the Edge

Russ Steele

Mark Meckler writing on his blog Across the Fence – The Return to Self Governance has  an impassioned plea on need to save California:  Is California Near the Edge of the Cliff? The simple answer: “Yes.” And my heart is breaking.

My heart is breaking for my home state of California.  Rational people who are still working to earn a living and live in the once great state of California are leaving, and looking to leave, in record numbers.  I was born and raised here.  I love the state.  The climate, and the geographical diversity cannot be beat.  It’s a stunningly beautiful place that offers something for everyone.  In addition to being a happy home for those of us born here, it has been a magnet for immigrants for many decades, offering opportunity like nowhere else.  But today, things are different.  My family has been looking to leave, along with a tide of hundreds of thousands of other productive citizens of the once “Golden State.”

California government (at both the state and local level) has managed to brew the perfect storm of insanity, and is committing slow motion societal suicide.  The brain, business and capital drain from California is taking place at a stunning pace.  The numbers back this up, as does the anecdotal evidence.  Ask anyone you know in California if they or people they know have considered leaving (or have left already), and you’ll find virtually no one who is untouched by the out migration issue.   So what’s driving this flow of our best, most hard working and brightest citizens to other states?  Well here’s just a sampling:

 Mark’s long list of why people are leaving CAlifornia is HERE.

Prop 23 Update: Socializing Your Power Bill

Russ Steele

Wayne Lusvardi writing at Cal Watchdog has the details on how the middle class will end up paying the lower classes water and power bills.  A stealthy way for the left to implement socialism in California.

The mere mention of the words Cap and Trade in California and people just tune out because it sounds too complicated to understand.   While it is complicated, it is nevertheless understandable.

What we’re learning about the California’s Cap and Trade program is that it is ending up as a giant government program to socialize the extraordinarily high rates that will be added to your electricity, natural gas and water bills from shifting to 33 percent green power in California by 2020.

Plans are in the works to include some form of rebate in your water and power bills for the higher cost of green power.  But it will be politically determined who gets larger or smaller rebates.  According to a report by the think tank Next 10, low-income and low-volume energy users are insulated by law against any energy increases in their utility bills due to the high cost of Green Power.  So it will be the middle class that ends up bearing the higher costs for green power for lower-income communities.

By socialized electricity rates is not meant the placing of power companies under government ownership or control.   What is meant is the spreading of higher energy costs from rebates by a formula to be politically determined.  Assembly Bill 32, the Global Warming Solutions Act of 2006, did not nationalize or socialize the means of producing electric power.  But it will be socializing or spreading the higher cost of green power to the middle class.

There could be some unintended consequences built in to this socialization of energy use.  With the middle class paying the lower class electric bills, the lower class maybe encouraged to increase their energy usage, someone else is paying the bill.  They may in fact believe that if they use more energy that they will receive more rebate. This would be counter CARBs goal of reducing energy use as the energy sector switches to wind and solar power.

Who would have thought it would be possible to use water and energy bills to kill the middle class and implement state wide socialism? Oh those crafty lefties in the State Legislature and their progressive thinking tank buddies. Right!

Prop 23 Update: EU Carbon Trading Is Over, CA Launching Carbon Trading

Russ Steele

While CARB plunges forward to implement cap and trade carbon trading in California the market for carbon in the EU has plunged to near zero due to the lack of demand.

Bavaria’s stock exchange will abandon its carbon emissions certificate trading operations in the EU-traded CO2 market on June 30 after volumes in Europe “plunged to practically zero” in recent months, it said on Tuesday. –Reuters, 22 May 2012

When the Chicago Carbon Exchanged closed, a BBQ briquet was worth more than a ton of carbon. How can CARB be selling carbon at $30 a ton when the world market has collapsed? Only in the land of fruits and nuts.

 

Prop 23 Update: A Lesson For California

Russ Steele

During the Prop 23 Campaign I warned readers about the negative economic impact of converting to alternative energy, that going green was going to destroy jobs, as companies left the state taking jobs with them. At that time I uses Spain as an example, who lost 2.4 industrial jobs for every green job created.  Now Spain’s unemployment rate is north of 23%, with the youth unemployment at about 50%. A dismal future for the country’s youth. Now this from Handelsblatt.

As a result of Germany’s green energy transition, electricity prices are exploding. Consumers and businesses are paying the price while Germany faces gradual de-industrialisation. Economists estimate that the cost of the green energy transition will total 170 billion Euros by 2020. This is more than double of what Germany would have to write off if Greece were to withdraw from the monetary union. “The de-industrialization has already begun,” the EU Energy Commissioner Guenther Oettinger has warned.

German corporations are moving energy consuming industries offshore, along with the core of the German economy. The same will happen in California as the cost of energy soars. While California is known for its innovations, those innovative companies are not building manufacturing plants in the state. They are moving manufacturing to low cost energy states and offshore.

Wake up Sacramento. Look at what where economic growth is taking place in the United States, the states that are revitalizing their energy sector. The markets are moving these state in the exact direction California should go — toward cheap, plentiful energy. We have the energy, in our shale gas formations and in offshore oil, yet our political leaders refuse to exploit it. Without learning the positive lessons of North Dakota, Pennsylvania, Wyoming and the negative lesson of Germany and Spain, California’s de-industrialisation and resulting job loss will continue. The lessons are there, it is time for our political leaders to stop ignoring them.

The Economist Shares My Economic Ignorance.

Russ Steele

Our local lefty blogger writes:

BTW, longtime hard-right blogger Russ Steele is showing his ignorance about financial matters here:

http://2012nevadacounty.wordpress.com/2012/05/21/gov-brown-call-your-office-facebook-shares-plunging/

Russ doesn’t seem to understand that Facebook rank-and-file and “insiders” — California residents — sold their shares before the public IPO and that capital gains taxes and sales taxes will be recorded regardless of what is happening in the “retail” market.

ooo

This is all good news. Nobody ever said the Facebook IPO would bail out California.

Having never been and “insider” like our lefty blog has been when C/Net went public, I would not know how those “insiders” make out while the rest of of 99% wish we were one. That said,  this is what the Economist said about the Facebook IPO and CA budget bailout.  The basis for my comment about the economic impact on California if the Facebook stock fails to soar after the IPO.

The Facebook Effect

A single IPO may have a big effect on the world’s ninth-largest economy

AMONG those in suspense as Facebook prepares for its initial public offering (IPO) of shares later this month are the bean-counters of California. After all, Facebook, which could be worth as much as $100 billion, is a Californian company and many of its employees, including its founder, Mark Zuckerberg, live there. That means they may soon be paying lots of tax.

The IPO’s timing fortuitously coincides with the beginning of California’s annual budget “kabuki”, as a former governor, Arnold Schwarzenegger, called the process. This kicks off with the official revision, on May 14th, by the current governor, Jerry Brown, of estimated incomings and outgoings. It drags on through June in the legislature and then, if all goes well, the governor signs something resembling a balanced budget by July 1st, the start of the new fiscal year.

Last year Mr Brown proposed spending $89 billion for the current fiscal year, which began on July 1st. As in recent years, however, revenues are falling short of official projections. Jason Sisney of the non-partisan Legislative Analyst’s Office says that the state seems to be facing an overall budget “problem” of more than $9 billion this year and next.

Enter Facebook (see article). The details are not yet known—at what price the shares list, how many Facebookers cash out, and so forth. But back-of-the-envelope calculations by Mr Sisney suggest that California might get a windfall of $2 billion over the current and coming fiscal years, and possibly billions more if the shares trade well.

In California such mathematical games bring giddy memories of the dotcom boom in the 1990s, and of the previous big listing, by Google, in 2004. That particular IPO [Goodgle] led to $7 billion in windfall tax revenues over the subsequent three years, by minting a new batch of millionaires with income and capital gains to declare. [Emphasis is editors]

If I understand what the Economist said, Governor Brown’s budget could see a big upside if Facebook stocks failed to soar.  The stock was sliding down hill when I posted and it is still down at the end of the day.  The shares dropped below their offering price in their first full day of trading Monday, wiping $11.5 billion off the social network’s market value.

That was the basis of my “ignorant”comment, which was a little in jest.   It is nice to have the company The Economist in my ignorance. They seem to think a soaring FB stock would have an economic impact on CA.

If I has been an “insider” cashing out would be the right thing to do.  Three years after IPO 2/3s of all  stocks had negative returns. Since 2010 60% of all IPOs have negative returns so far. Stay tuned for more ignorance.

CARB Makes Rules, Companies Game Rules for Profit

Russ Steele

The Legislature and former a Gov made the rules when they passed AB-32, and CARB established  the mandated Cap and Trade program. One to the four cap and trade offset protocols established by CARB was  Improving Forest Management.

Now the environmentalist have discovered that Sierra Pacific Industries is going to make millions of dollars by gaming the system and they are upset.  SPI is going to log the forest and then plant replacement trees. They do this as a normal business practice in the timber industry, however now they are going to collect offset credits from CARB for the plant of those trees.

This gaming of the system by timber companines has been discovered by NBC’s Bay Area Investigation Team. Details HERE.  Here is the part of the story that warms my heart.

Companies that harvest timber like Sierra Pacific Industries, also known as SPI, admit they stand to gain tens or even hundreds of millions of dollars through carbon offsets.

“You’re not doing this out of the goodness of your heart,” Stock said to Ed Murphy, SPI’s manager of Resource Information Systems. “Of course not,” replied Murphy.

Murphy further explained his position on the issue raised by The Center for Biological Diversity: Additionality (or adding more things such as trees to reduce carbon further than what would be expected under normal or ‘business as usual’ conditions.

“Under the definition of additionality, there’s a process called common practice,” said Murphy. “We can show we’re well above common practice in terms of total carbon stored. But more importantly, the change in business practices comes when once we move into the offset market, we can no longer cut the forest down.”

Awesome, SPI gets the offset credits with a promised not to cut down the newly planted trees for a 100 years.  It takes about 90 years to grow a good sized tree. Better yet in 20 years CARB’s and Cap and Trade will be nothing more that a economic foot note in the collapse of the California economy following the Next Grand Minimum. Go SPI, take the money and run!   Future generations will cut the trees to stay warm!

You Thought the CA Economy Could Not Get Any Worse – Really?

Russ Steele

Governor Brown will have his tax initiative on the ballots and the Milken Institute reports that operating a business in California is 23 percent higher than the national average.

This is not lost on CA business. In 2011, 254 California companies moved all or some of their work and the associated jobs out of state, according to Irvine business consultant Joe Vranich,  who has been tracking these departures since 2009.

The pace is accelerating according to Vranich.  An average of 4.9 businesses left California each week of 2011, compared to 3.9 per week (202 total) in 2010 and one a week (51 total) in 2009.

With the implementation of AB-32’s Cap and Trade program this fall, business and home owner can expect electrical rates to jump as utility companies are forced to load up on renewable energy, some that cost 50 percent more than plentiful natural gas.  Details in the graphic below:

I have written about the PG&E program to institute the time of day rate increases that smart meters alls them to do HERE.  Those costs are not figured in the Cap and Trade rate increases out lined above. Running a energy intense business during the day in the summer will be very costly.

Governor Brown cannot collect taxes on business that have left the state, though some legislators are trying to figure out ways do that.  I predict that with the increase in energy costs and more business taxes, that the number of jobs leaving the state will continue to accelerate.  The CA economy will feel the impact. Yes, the economy is going to get worse.

Sacramento Cannot Stop Spending Even When the Wallet is Empty

Russ Steele

California is $16 billion in the hole, but our spendthrift political leaders want to waste $3.5 million a day building a high speed rail that no one will ride, and is really not high speed over 1/4 of the route. It will cost less in time and money to fly.  The LA Times has the construction story:

If California starts building a 130-mile segment of high-speed rail late this year as planned, it will enter into a risky race against a deadline set up under federal law.

The bullet train track through the Central Valley would cost $6 billion and have to be completed by September 2017, or else potentially lose some of its federal funding. It would mean spending as much as $3.5 million every calendar day, holidays and weekends included — the fastest rate of transportation construction known in U.S. history, according to industry and academic experts.

Over four years, the California High-Speed Rail Authority would need as many as 120 permits, mostly from a tangle of government regulatory agencies not known to rush their business. It would need to acquire about 1,100 parcels of land, many from powerful agriculture interests that have already threatened to sue. And it would need to assemble five teams of contractors with giant workforces positioned from Fresno to Bakersfield, moving millions of tons of gravel, steel rail and heavy equipment across the valley.

What could possibly go wrong with this massively expensive boondoggle?  This is exactly the sort of thing that will insure we become a bankrupt ward of the Federal government.  The eventual cost of the project will be $98 billion!  We cannot afford a crippled high speed rail that no one will ride?  Time to throw out the big spenders!

Gov. Brown’s “balanced approach” Recipe for Economic Disaster

Russ Steele

The balanced approach to economic recover as proposed by Governor Brown is to cut spending while raising taxes on the wealthy. How well has this approach worked? Veronique de Rugy a Senior Research Fellow at the George Mason Mercatus Center for free market economics has some insight in Two Kinds of Austerity

This approach to austerity, also known in the United States as the “balanced approach,” has unfortunately proven a recipe for disaster. In a 2009 paper, Harvard University’s Alberto Alesina and Silvia Ardagna looked at 107 attempts to reduce the ratio of debt to gross domestic product over 30 years in countries in the Organisation for Economic Co-operation and Development. They found fiscal adjustments consisting of both tax increases and spending cuts generally failed to stabilize the debt and were also more likely to cause economic contractions. On the other hand, successful austerity packages resulted from making spending cuts without tax increases. They also found this form of austerity is more likely associated with economic expansion rather than with recession.

Veronique provides some concrete examples that the real solution is to just cut spending and not raise taxes.

The Baltic nations of Latvia, Lithuania and Estonia provide good examples of successful fiscal adjustments. In the last few years, and contrary to the rest of Europe, the Baltic countries have focused on significantly cutting government spending without equivalent increases in taxes. As a result, the Cato Institute’s Dan Mitchell reports, between 2008 and 2011, Estonia and Lithuania reduced nominal spending by 5 percent, and Latvia by 11 percent. France and the United Kingdom increased spending more than 8 percent over the same period, and Spain and Italy increased spending by 3 percent. In contrast to these others, the Baltic states have experienced some of the largest economic gains in the world: Between 2009 and 2010, Estonia’s economy rose from an annual GDP growth of minus-13 percent to 3.1 percent.

California’s political leaders looked to Europe for examples when “going green,” and that did not work out well. However,  it may be useful now if they took a look at how the Baltic nations succeeded in generating an economic recovery by not raising taxes and just cutting spending.  Raising taxes is just driving the revenue generators out of the state, making the problem worse.

Climate mania impoverishes electricity customers here and abroad

Russ Steele

Several readers have forward the Financial Post article below on how climate mania is impoverishing citizens ad alternative energy schemes are used to drive up the cost of energy.  Even though this is a world wide impact,  there is also a connection to California.  First this from the Financial Post: Lawrence Solomon: Green power failure

The North American exemplar of acting on the perceived threat of global warming is Ontario, which dismantled one of the continent’s finest fleets of coal plants in pursuit of becoming a green leader. Then, to induce developers to build uneconomic renewable energy facilities, the Ontario government paid them as much as 80 times the market rate for power. The result is power prices that rose rapidly (about 50% since 2005) and will continue to do so: Ontarians can expect power prices that are 46% higher over the next five years, according to a 2010 Ontario government estimate, and more than 100% higher according to independent estimates. The rest of Canada may not fare much better — the National Energy Board forecasts power prices 42% higher by 2035, while some estimates have Canadian power prices 50% higher by 2020.

Another reader saw the California connection on the CARB website:

If you go to the CARB web site, http://www.arb.ca.gov/cc/capandtrade/capandtrade.htm, you’ll find this sentence, “California is working closely with British Columbia, Ontario, Quebec and Manitoba through the Western Climate Initiative to develop harmonized cap and trade programs that will deliver cost-effective emission reductions.”

The question is if Canadian Provinces are going to harmonize Cap and Trade programs, that will also result in the harmonization of energy costs. We can also expect our power prices to go up 45 to 50 percent as well. However, the Financial Post article points out that the rest of the US is seeing stable or slight declines in the price of electricity. As energy prices rise in California, they will be  declining in the rest of the US as power companies adopt more cheap natural gas. As fracking produces more gas the price continues to drop.

The question one reader asks is:

Will the abundant supply of cheap natural gas overcome the renewable mandates to keep California’s rates from rising or will California’s rate payers see price rises like they did in Ontario?

Given what we know about CARB’s single minded focus on creating a Cap and Trade slush fund and the environmental wacko legislators in Sacramento, who are taking big time political donations from all the “go green” VCs, I have serious doubts that California will ever take full advantage of cheap natural gas and move away form the more expensive alternative energy schemes, there is just too much money involved, and too little political power in the hands of rate payers.

“Can-Do California” Lefty View of Economic Development

Russ Steele

When ever I see the word “smart” in a report my BS detector goes off. You can imagine what happened when I read the following description of an Southern CA economic summit. [My emphasis added.]

We branded the summit “Thriving Regions Lead to a Thriving State” and the theme of this summit, which will address actionable priorities in five areas, is “Can-Do California.”

Smart workforce: Despite out-of-work Californians, there are not enough qualified workers, even for middle-class manufacturing jobs. We must strengthen the talent pipeline, short-term and long-term, to meet the skill needs of our ever-changing economy. California can do that.

Smart infrastructure: The bill for California’s infrastructure neglect is $765 billion, including transportation, water and public facilities. We need world-class infrastructure. The summit will identify ways to improve our existing infrastructure and map out innovative financing for new infrastructure, and it will focus on water, a top San Diego priority. California can solve its infrastructure problem.

Smart innovation: Californians still lead the world in technology, agriculture and entertainment, but we’re complacent. Other regions and other nations are closing the gap. With our world-class universities, there is more we can do to move ideas from the lab to the market and to help entrepreneurs succeed. Policies that foster innovation across all industries are critical to regional economies, so the summit will identify the next best ways to connect, feed and entertain the world. California can remain the leader in innovation.

Smart capital: Creating jobs takes money. At every regional forum, entrepreneurs implored: Help us find the money! We can leverage existing resources, identify ways to invest locally, including a California version of crowdfunding, and expand on the linkages that help ensure young businesses succeed. Californians want to invest in and buy from Californians, given the chance. California can connect entrepreneurs with capital.

Smart regulations: California is said to be a tough place to do business. Regional forum participants said “more red carpet and less red tape,” and offered ideas that protect the intent of California’s key environmental regulation, CEQA – high environmental standards – but limit the actions of those who use CEQA for non-environmental reasons. The regional forums also explored ways to streamline permitting of all kinds. California can maintain the highest environmental standards and be streamlined, certain and business-friendly.

In short, thanks to the regions and the many Californians who participated in regional forums, we can become a “Can-Do” state once again.

Huh?  Switch your BS detector on as there are still more details HERE.