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PURE ENERGY CRISIS: Stock, Cap & Trade- What It Means for You
In the wake lastest video (http://www.youtube.com/watch?v=Hdi4onAQBWQ) making the internet rounds where Obama makes the claim he would bankrupt the Clean Coal Industry requires a little insight and understanding. What few notice in that video are two words; "Cap and Trade." Emissions trading is an administrative approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants. It is sometimes called cap and trade. Due to emissions trading, coal might become less competitive as a fuel. A central authority (usually a government or international body) sets a limit or caps the amount a pollutant can be emitted by a production plant or power company. Companies or other groups are issued emission permits and are required to hold an equivalent number of allowances (or credits) which represent the right to emit a specific amount. The total amount of allowances and credits cannot exceed the cap, limiting total emissions to that level. Companies that need to increase their emission allowance must purchase credits from power compnanies who pollute less. The transfer of allowances is referred to as a trade and is slated to become the next family of securities in the financial market. In effect, the buyer is paying a charge for polluting, while the seller is being rewarded for having reduced emissions by more than was needed. Thus, in theory, those that can easily reduce emissions most cheaply will do so, achieving the pollution reduction at the lowest possible cost. Carbon trading is sometimes seen as a better approach than a direct carbon tax or direct regulation. By solely aiming at the cap, it avoids the consequences and compromises that often accompany other methods. It can be cheaper, and politically preferable for existing industries because the initial allocation of allowances is often allocated with a grandfathering provision where rights are issued in proportion to historical emissions. In addition, most of the money in the system is spent on environmental activities, and the investment directed at sustainable projects that earn credits in the developing world can contribute to the Millennium Development Goals. Critics of emissions trading point to problems of complexity, monitoring, enforcement, and sometimes dispute the initial allocation methods and cap. WHAT DOES THIS MEAN FOR ME? The answer is simple. Let's say for instance you hold stock in TP- that's Transylvania Power. Roughly 50 percent of all electricity is generated by firing coal nationwide, TP included. So what happens if a coal-firing power plant has to purchase credits from another who's emissions fall below the cap? Under an Obama Administration and an agressive cap and trade policy and this is extremely important, the cost will be reflected in your montly electrical utility bill and/or the company simply struggles to remain in business. What does that do to stock you hold in Transylvania Power- you can guess the rest. SO WHY ARE WE BURNING COAL IN THE FIRST PLACE? The nuclear energy industry has not opened a new power plant in the United States since the 1979 accident at Three Mile Island. WHAT ABOUT ALTERNATIVE ENERGY PRODUCTION? A dependable, reliable method of producing alternative energy has yet to emerge as the grand prize winner. SO WHAT IS OBAMA SAYING? It's what he's not saying. The more it costs a company to remain in business, the more it costs consumers to buy products or services from that business. If Congress enacts a cap and trade system or a carbon tax, which they probably will under an Obama Administration, carbon-free nuclear energy would gain a competitive advantage over fossil fuel energy production such as coal, oil and natural gas that account for the bulk of today's energy output. SO WHERE'S THE PROBLEM? Like Clinton, Obama has yet to become close friend, ally, and advocate of the Nuclear Energy Industry and pitching alternative energy production is a wonderful political football but aggressive cap and trade comes at a high cost- high consumer energy prices. People love the sound of 'alternative energy' and they're sold, hook, line, and sinker. The reality is simply alternative energy technology is in its infancy and a reliable, dependable, proven source of producing alternative energy other than nuclear energy production won't be online and ready to meet the needs of country-wide consumer demand for many, many years to come. On a final note, let me point out the hard net power output generation figures for last year: Coal- 50 percent Natural Gas - 19 percent Petrolium - roughly 2 percent Nuclear - 19.4 percent Renewables - 2.2 percent Hydro-electric - 7 percent Other/Gases - roughly 1 percent *email for sources
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