The Republicans, MIT and Cap and Trade

Congressman Boehner and the House Republicans used an MIT Energy Report to say that the cost per household was to be $3,000. Then the MIT Group wrote a rebuttal letter. This is from the web site of Think Group. They have a few facts incorrect starting with calling Reilly a Professor. Let us look at a short analysis of the problem. Unlike the Sloan School wonks, I am just a humble engineer who thinks that the back of an envelope is all one needs if you have any idea what you are speaking of. Remember folks, it was the Sloan School quants who got us into this mess in the first place. So beware!

Now to the envelope. Here are the facts:

1. The current Administration wants to create an auction for any and all carbon credits, this is an open public auction held by the Government and for any and all carbon credits, NOT just those above a cap. The auction will sell off the rights to emit a metric ton of CO2. Well what price will clear the market, $5, $25, $50, who knows. What we do know is that when the Government auctioned spectrum, which frankly has little human survival value, as compared to electricity, it was a lot more money than expected. Solet's say $25, although I think this is too low.

2. As of 2010 assuming no miracles in the deployment of a smart grid, wind mills, nuclear power and the like, the current demand for just electricity generates 2,388 million mTon of CO2. True fact.

3. Now multiple $25 by 2.4 billion and we get $60 billion. Now divide by 300 million people and we get $200 per person. Now assume 2.5 people per HH we get $500 per HH in 2010. That is not chopped liver! And that is just the beginning.

4. Now the fun begins. The demand goes up, so does the population. By 2030 the cap is lowered to 50% of what it was in 2010. Just what does that mean? It means the auction price goes up dramatically. We have estimated that it readily exceeds $3,000 to $5,000 per HH by 2030! That is in 2008 dollars even! In addition, the Government will penalize excessive uses. That will further drive prices up.

So where are these guys at MIT getting with their politically incorrect jabbering. Frankly nowhere. Their analysis, and one must read the MIT letter to see how convolved it becomes, just misses the point. The current Administration proposal is a stand-alone plan, devoid of any multinational compliance, and one where every gram of CO2 is taxed ab initio. Starting from the first emission.

Thus, one need just run through the numbers. It is not complex. We have commented and written on this extensively, but all you have to do is run the numbers. They just explode in terms of their regressiveness as a tax. They will destroy the economy. The unintended consequences are massive, massively negative.