1. The Administration places a cap on CO2 emissions by region.
2. Emitters are adjudged as contributing emissions based upon the amount of fuel the use. Thus there are a certain amount of CO2 in metric Ton, mTn, emitted per X BTU of coal or the like.
3. Emitters can then determine what their cap is on some pro rata basis.
4. Then an emitter is either in excess or surplus, namely they emit too much or emit too little.
5. Then we assume some exchange to swap these credits and debits, at a small fee of course, and there is some guru who has established and profits from the exchange, possibly an Al Gore. Perhaps if you create the problem you may profit from it.
6. If the emitters exceed the cap they then pay the Government for this excess, say at $50 per mTn of CO2.
Simple, yes but it is the dynamics that catch you.
1. You may think wind and solar and nuclear will win, since they emit no CO2.
2. Wait, environmentalists object to each. Wind makes the Cape and the waterfront in New Jersey look bad or kill birds or the like. Nuclear, well we all know nuclear, everyone hates it. And solar, well there are crowds who oppose that as well. Thus the zero emitters are blocked while the cap decreases each year to 20% of the 1990 number, which is about 10% of now! Get used to living on a single light bulb. At that point London in 1599 emitted more CO2 than all the earth at that point.
3. But Oops, we forgot, the population keeps getting larger and each person demand more BTU per person and thus the total demand is exploding.
4. Coal being the greatest emitter and taxed the most is displaced by gas and oil, increasing the demand on gas and oil, driving the price of gas and oil higher and higher.
5. Since the environmentalists stopped all zero emitters, the excess emissions are now taxed at more than $50 per mTn thus exponentially adding to the cost of a BTU.
6. The combined emission tax and costs of gas and oil drive the cost of BTU into an unstable mode.
7. Total collapse of civilization occurs!
The developers of this have failed to account for the dynamics and instabilities in this process. This is deadly.
First, the exchange for a Cap and Trade will have its own options and Credit Default Swap markets as well and these may be extra-territorial since we are taxing the heck out of everything here. It will be an unregulated market for better or worse.
Then second the dynamics of the process are not well understood. The model we present shows growing exogenous population and the demands per person are unbounded.
However the exogenous effectors of delay such as the environmentalists will allow for reduction in caps while delaying the introduction of alternative means. The market distortions will result in uncertainties and shortages each reflected in explosive prices.
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