korkmas ppt

CAP AND TRADE

PRESENTED TO THE PASADENA ROTARY CLUB

August 27, 2010

By

Thomas Larry Korkmas

Commercial Dispute Resolution Associates

Houston, Tx.

larry.korkmas@cdra.biz

CAP AND TRADE

CONGRESSIONAL TITLE: H.R. 2454BILL TITLE: American Clean Energy and Security Act of 2009

AKA: WAXMAN-MARKEY Cap and Trade Bill

CAP & TRADE

The most sinister program to come from Washington since the Income

Tax and Federal Reserve Act

Genesis of Cap & Trade

• Clean Air Act of 1980• Reinvestment Act of 2009• Energy Department Initiatives• EPA Initiatives

WHAT IS CAP & TRADE ?

• Cap & Trade is a public policy law whereby carbon dioxide emissions, and those who generate emissions, are controlled, taxed, traded and sold.

• It is regulation and control over production and use of all energy by rationing and taxing.

• It is the ultimate power that a government can wield to control every aspect of modern life.

• It is rationalized by the discredited “science” of man-made global warming and climate change.

What is being “capped” and “traded”

“Cap and Trade is an environmental policy tool that delivers results with a mandatory cap on emissions while providing sources flexibility in how they comply. Successful cap and trade programs reward innovation, efficiency, and early action and provide strict environmental accountability without inhibiting economic growth. “Source: USEPA

Numerous Approaches

• House Bill – HR 2454-Focus on all aspects of energy use.

• Senate Bill – Focus on large producers.• Reconciliation – Likely to combine both.• When-Lame duck session beginning 11-3-

10• State Action -- Some states

implementing unilaterally + some cities (Austin and San Francisco).

• International Action

How are trades accomplished?

• Chicago Climate Exchange (CXX) is to handle the trading and worldwide inventory of credits.

• Shore Bank was poised to become the clearinghouse bank for all of the carbon credits that will be traded once Cap and Trade is passed. (Shore Bank was closed by the FDIC on August 20, 2010 and its assets and deposits taken over by Urban Partnership Bank.

WHAT IS THE GOAL

TOTAL GOVERNMENTCONTROL OVER EVERYTHING!

• Oil, coal and other fossil fuels• Wind, solar, tidal• Hydroelectric, geothermal and nuclear• Construction codes• Farming• Transportation

From the Pew Research Center

The government could establish a cap and trade system, setting an overall emissions cap of 600 tons and then issuing 600 emissions allowances. If Allowances were evenly distributed, both emitters would have an incentive to trade because emissions reduction costs are higher for A than for B.

Contd.

• Emitter B might cut emissions by 200 tons and sell its excess allowances to emitter A for less than it would have cost Emitter A to make the reductions itself (for example, $2,500. for 100 allowances). In this scenario, the desired level of emissions is reached at a lower total cost of $4,500 and a lower cost per ton of $15. Total cost is lower, as is the cost for each regulated facility

Ancillary Benefits to Government

The ultimate business stimulus as the house bill requires all:

• homes, • multi-family, • commercial,• office, • retail • industrial Cont’d on next page

Benefits to Government Cont’d.

would have to be extensively retrofitted to minimize the emission of “green house” gases and reduce energy consumption.

• No one would be able to buy or sell improved property without federal approval!

KEY ELEMENTS

• All properties must be registered with the federal government!

• Remember when the census takers took the GPS coordinates for each home and apartment?

• In order to sell, the property must be inspected and brought into compliance with government standards and certified before it can be sold! No more “as-is where-is” or grandfathered conditions.

• No fixed regulations. EPA can change at whim.

What has to be done to sell

Replacement of the following:• Water Heaters• Windows• HVAC systems• Shower heads and faucet aerators• Washers, dryers and dishwashers• Range tops and stoves• Roof materials and color

Replacements Cont’d

• Most current lighting fixtures-most likely a ban on all incandescent lighting.

• Restaurant equipment.• Transformers, capacitors and control

equipment.• Outdoor lighting.• Outdoor security systems.

EFFECTS ON THE COMMUNITY

• A major period of time when very little real estate, except land, can be sold.

• All utility costs will rise significantly and there will be resistance to expense pass – throughs by tenants.

• Capital resources will be spent on non-income producing, rapidly depreciating improvements, the rules for which can change annually.

EFFECTS CONT’D.

• Lenders will fail as few will be able to stay in business during the implementation. Owners with negative equity after implementation are likely to default.

• Mobility cost and loss will cripple transfers and moves of employees and relocation of companies.

CRIPPLING OF CITY, COUNTY, SCHOOL DISTRICTS AND STATE GOVERNMENT

• The tax base that generates property taxes will be reduced by 20 to 40% as property values are adjusted to reflect the cost of compliance.

• Cap & trade compliance rules will fall on all government entities and cause a downward rating of bonds and credit, depending on how much infrastructure has to be replaced.

TO YOU PERSONALLY

• Your home and properties decline in value. (Your net worth declines!)

• Any loan you have on short term will be re-evaluated and you may have to add equity in order to get a new loan.

• A void in your income stream for months or years while the program is implemented.

• Increased liability – increased disclosure rules.

New Building Codes

• New building codes are to result in a 30% reduction in energy use.

• Cities, Counties and States are to adopt building codes acceptable to the federal government (EPA).

• If the codes are not acceptable, the states and sub-entities may be forced to accept a National Building Code.

TO YOUR CLIENTS

• Immediate loss of value in most instances.

• Real estate no longer has any liquidity.• Increased lender requirements and

higher equity requirements for business and real estate loans.

WHAT YOU CAN DO

• Write your U. S. representative and senator, mayor, county commissioner, and governor explaining how their actions affect your business.

• Make sure that all government entities, including your school district, understand that they will have major revenue losses.

“Thanks to the Recovery Act, thousands of construction workers across the country are now on the job making energy-saving home improvements

that will save working families hundreds of dollars a year on their utility bills,” Biden said in a statement.

“From replacing windows and doors to adding insulation, these are small changes that are making a

big difference for American workers, manufacturer

and consumers.”Joe Biden, Manchester, N.H. August 26, 2010

ALERT YOUR CLIENTS

• It is amazing how many people are totally unaware of what is happening in congress and the administration.

• Point out that their personal net worth and financial condition will decline.

• Remind them that congress must read the bills they vote on. ASK YOUR CLIENT TO TELL CONGRESS TO VOTE NO