Who would have thought that a smokestack or a   car’s tailpipe would be a gold mine for commodity speculators? Well, the gases coming out of them may turn out to be as valuable as crude oil — that is, if climate-change mandates don’t bankrupt America first.

There’s no free lunch here. Somebody has to pay to reduce greenhouse gases, and that somebody is you and I. If your power bill skyrockets or you get a government invoice in your mailbox for using too much gasoline, you can thank a scheme being considered in the U.S. Congress, and perhaps in Olympia, called “cap and trade.”

It started in Europe and is quickly migrating to the states. It has become the central funding mechanism used to pay for pollution cops who will make sure you don’t release too much CO2. It’s not a bad gas unless there is too much of it. Remember your fifth-grade science: Plants inhale carbon dioxide and convert it to the oxygen we breathe.

Here’s how cap and trade works: a factory, school, power plant or — perhaps someday — cars and trucks, are assigned an emissions quota. That’s the “cap” part of equation. If you go over your limit, you have to buy credits from those who emit below the limit. That’s the “trade,” and that is manna from heaven for commodity brokers.

Chelan PUD selling ‘carbon offsets’
For example, in anticipation of a federal — and perhaps a Washington state — cap and trade system, the Chelan Public Utilities District registered its carbon offsets with the Chicago Climate Exchange earlier this year. The PUD figures that recent improvements to the Rocky Reach Dam just north of Wenatchee on the Columbia River means that 700,000 tons of carbon dioxide won’t be pumped into the atmosphere and, therefore, are up for sale. At last report, 160,000 tons are already sold.

If you live in the Chelan PUD service area, you could see your electric bill stabilize in the future — that is, unless dam removal activists stretch their campaign beyond the four lower Snake River dams and go after those on the Columbia.

For the average family and small business, the cap and trade system may take the form of a “carbon tax.” Not only would you pay federal and state gasoline taxes to build and maintain roads and pay tolls on bridges, but you would also pay a tax on how much comes out of your tailpipe or chimney.

European Union cap and trade
The European Union, which has a cap and trade system for oil refineries, steel mills and power plants but has not included retail stores, cars, airplanes or commercial buildings, saw the price of carbon credits soar in commodity trading. However, the anticipated improvements to the environment haven’t materialized. In the last three years since it was introduced greenhouse gases increased, and last year the Oslo-based Point Carbon, a carbon market-research firm, said CO2 went up by 1.1 percent.

In April, the Wall Street Journal reported that although cap and trade has so far failed to reduce emissions, it has spawned a fast-growing market for trading carbon permits. Last year, the value of all carbon credits traded in Europe topped $40 billion, up 55 percent from the previous year. Hedge funds, investment banks and brokers trade carbon credits as they would other commodities — like gold.

Despite Europe’s problems with cap and trade, Sens. Joseph Lieberman, I-Conn., and John Warner, R-Va., incorporated the idea into their legislation, known as America’s Climate Security Act of 2007. Although the measure is not expected to pass this year, it’s a prototype for what is to come.

The legislation is complicated and its sponsors claim that by 2050 it would reduce U.S. greenhouse gas emissions by 63 percent. The bill would cap emissions at 2005 levels until 2012. Between 2012 and 2020, releases would be further reduced by 2 percent per year, resulting in a 15 percent reduction below 2005 levels.

A key stumbling block is projected population growth. Remember, people release carbon dioxide every day while breathing, heating their homes and riding the bus to work. So, while the goal is laudable, the practicality of achieving it is very problematic.

The bankrupting of America
“We’re bankrupting our economy for very little gain [if the legislation passes]”, said Keith McCoy, vice president of the National Association of Manufacturers. McCoy and a panel of experts addressed the issue of climate change at AWB’s governmental affairs council retreat in July.

The federal legislation is ostensibly intended to cut U.S. industrial emissions even though there is no guarantee that heavy polluters like China will even address global warming, let alone abide by our limits and edicts.

NAM predicts the country’s economic output could fall by nearly $670 billion by 2030 as power plants, refineries, manufacturers and other businesses are forced to deal with new requirements. NAM figures as many as 4 million jobs could disappear by 2030, gas prices could hit $8 a gallon, and home electricity bills could rise by 150 percent.

While Texas, Florida and Georgia could be among the hardest-hit states because of their current energy sources, usage and their size, NAM and the American Council for Capital Formation studies show the costs to Washington are staggering.

 Under the Lieberman-Warner bill, Washington could lose as many as 35,000 jobs by 2020 and more than 82,000 by 2030. The primary cause of job losses would be lower industrial output due to higher energy prices, the high cost of complying with required emissions cuts, and greater competition from overseas manufacturers with lower energy costs and fewer regulations.

For a high-cost state like Washington, enormous new energy bills for industries and business would have a ripple impact throughout our economy and would impose a financial cost on households. Our state could see disposable household income drop by $3,500 per year in 2020. NAM estimates an $8,200 decline by 2030 decline.

Washington gets clobbered
Most energy prices would rise under the Lieberman-Warner plot, particularly coal, oil and natural gas. The price of gasoline in Washington could increase between 72 and 151 percent by 2030, while electricity prices would go up by almost 50 percent. Washington residents could pay as much as 150 percent more for their natural gas by 2030.

When lawmakers return to Olympia next January, they are expected to reintroduce hordes of climate change bills dealing with everything from land use to taxes and fees to driving habits. The 2008 session was a tune-up for next year when the elections are over.

It remains to be seen whether legislators will ignore what is naturally happening in the marketplace. For example, high gas costs are already dramatically changing the cars manufacturers make. “People, not governments, demand hybrids and fuel efficiency,” said AWB President Don Brunell. “Rising energy costs also drive conservation and efficiencies that benefit our environment.”

The big question for AWB members is, will lawmakers stop the stampede to legislate and regulate and carefully consider the costs and benefits of their actions? “We hope they will do the math and tell their constituents ahead of time what the true costs are,” said Brunell. “Increased costs particularly hurt families and people on fixed income.”

Another equally vexing question is, will politicians even look at U.S. Energy Information Office data, which shows that — even with all of the conservation, solar, wind and renewable sources we can possibly develop — our nation will need to generate half of its electricity from coal by 2030?

Our public policy-makers can’t turn a blind eye to the cumulative impacts of what they are proposing. While it may sound good, in reality the unintended consequences could be very dramatic for our everyday lives.

It bears remembering that, while America is still the beacon of hope for market-based economies worldwide, we have serious competitive challenges from China, India and other rapidly developing nations that are not required to comply with the mandates placed on us by our state and federal governments.

“It’s all about the future of America, our economy and our families,” said Brunell. “We can’t lose sight of the improvements we continue to make in the quality of our air, our water and our land.”