Cap and Trade seems to be the latest government idea to save us from ourselves. I don’t like it one bit, but I need to learn more about it. Especially as to how it will affect railroads.
The way I understand things, the government will establish a “Cap” for each industry with regards to amount of CO2 that can be put in the air. This “Cap” will be something like 80% of the current CO2 discharge level for each company. If a company exceeds its government assigned level it must “buy” carbon credits from another company that is below its assigned level. This will greatly limit the amount of carbon energy than a company can use, and carbon energy has been a principal source of progress since the first human use of fire.
So, how will this affect the railroads?
Right off the bat, they’re going to have to reduce fuel usage. By law. That will mean fewer, longer, and slower trains. I see this factor alone as harming the economy by driving up logistics costs. Back to the drag freight era.
But the greatest railroad harm from Cap and Trade will come at the margins. A company maximizes its income by increasing production until the revenue from the last unit of production equals the increased cost producing of that unit. Small business owners do this instinctively, i.e. an experienced tavern owner will learn/know that adding varieties of tap beer will increase costs and revenues; to a point. He/she will add varieties until the extra costs of doing so exceed the extra revenue realized. The railroads hire MBA’s to do what the tavern owner does in his/her head, but the same principal applies.
Visualize a local that a railroad somehow calculates contributes $1,000/week to the bottom line. Now, here comes the government with its Cap and Trade program. Good-by local. The carbon credits just made the $1,000 contribution go away. The railroad jobs are gone
I’d wonder if the RR’s could trade some of the trucking companies carbon emissions - RR’s use less fuel per ton-mile than trucks, so almost automatically emit less carbon.
Another option is to electrify. A couple of potential problems, first being that electrification is expensive, second being that the electricity may come with carbon strings attached.
If “Cap and Trade” is going to be implemented (comes across as a very poorly thought-out plan), setting the caps by industry (i.e. treating RR’s, tucks and airfreight separately) can be really counterproductive. As I mentioned in my first paragraph, if reducing carbon emissions is the goal, then there should be a concerted effort to get as much long distance traffic on rail as possible (and possibly some short distance traffic as well). If reducing carbon emissions is really that important, then the use of air freight should be severely restricted and the traffic assigned to modern day equivalents of the Super-C.
I’d think a much better method of reducing carbon emissions is simply imposing a carbon tax and let economics find the optimum solution - and that’s assuming that it is carbon that needs to be limited rather than soot or contrails (I’d be really starting to sweat if I were in the airline industry).
i think this is all just a scam to “level” the playing field on many differnt levels… tax and or bill US companys that make and ship within the US…yet other developing parts of the world such as CHINA dont have nearly the same enviromental restrictions as we in the US have as it is now nor will never have…can keep making as big a “carbon footprint” as they want… this is just one more way for the goverment to get more money to waste… dont get me wrong im all for haveing a better cleaner enviroment as the next person… but this is just going overboard… the air and water havent been cleaner since the industrual revolotion took place in the 1860s… also the one thing that just makes me mad as hell are the people that are trying to “tell” me what i need to do to “protect” the enviroment are flying around on privet jets and strech limos back and forth from public speaking events or junket trips to take there mistress to paris… AL GORE is one of the biggest hippocrits of this… trying to tell the rest of the american public that they need to be worried about “climit change” yet he is in limos and privet jets to speaking events… if you ask me…he is putting more CO2 into the air everytime he opens his mouth then the averge locomotive puts out in a week…as well as many others that think that 100 years of burning some coal and oil have made as big a dent into the over all temp of the planet dont seem to remember that vocanos put more CO2 into the air in one day then all of the coal fired power plants… if someone wants to tell me that need to cut down on my “green house gas or carbon foot print” then say it from the back of a horse drawn wagon with a hand crancked electrical dynamo used to run the PA system…and actuly live the lifestyel the “preach” then then i might actuly take them somewhat seriousely…but till then… i dont and wont…
the earth has been around a heck of alot longer then man…this planet heats up and cools
actuly there was a study done a while ago about airliner contrails… it has been proven that they actuly help refect some of the suns energy just like normal clouds do… the resurchers that did this had a window to test this theroy was the days following 911 when all air traffic in the US was grounded… the results shows that in areas where there was major air traffic contrails the overall ground temp went up by a few degrees compaired to temp readings that where made befor air traffic was grounded and after air traval was allowed to resume…
heres a link about an artical that pretains to the study and its results…
It may prompt the industry to develope fuel cell locomotives for yard service and switching. I read in Trains(?) that UP was already doing this. The US army has a feul cell locomotive at one of it’s bases. It was written up in Fuel Cell magazine a couple of years ago. It looked like a GP-7 that had been modified. If all locomotives used in yard service did not contibute to CO2 emmisions, that would go a long way toward solving the problem of cap and trade.
Example: If a railroad is at the point of exceeding it’s carbon allotment (that in itself would be a number pulled out of thin air!), it is more likely to abandon a local branch than to pay out real money for carbon credits - citing the cost of buying enough carbon credits in it’s abandonment application.
Or, for a utility, it may be cheaper to convert coal-fired power plants to nuke or natural gas than it is to pay out real money for carbon credits. If this happens en masse, the rail industry will be crippled.
The only folks who will benefit from a carbon trading market will be the future Enrons of the world. In fact, Enron was the most vociferous proponent of establishing carbon regulation, since they were the most adept at trading in hot air!
Carbon trading - can anyone say “Enron times infinity”?
i think this is all just a scam to “level” the playing field on many differnt levels… tax and or bill US companys that make and ship within the US…yet other developing parts of the world such as CHINA dont have nearly the same enviromental restrictions as we in the US have as it is now nor will never have…can keep making as big a “carbon footprint” as they want… this is just one more way for the goverment to get more money to waste… dont get me wrong im all for haveing a better cleaner enviroment as the next person… but this is just going overboard… the air and water havent been cleaner since the industrual revolotion took place in the 1860s… also the one thing that just makes me mad as hell are the people that are trying to “tell” me what i need to do to “protect” the enviroment are flying around on privet jets and strech limos back and forth from public speaking events or junket trips to take there mistress to paris… AL GORE is one of the biggest hippocrits of this… trying to tell the rest of the american public that they need to be worried about “climit change” yet he is in limos and privet jets to speaking events… if you ask me…he is putting more CO2 into the air everytime he opens his mouth then the averge locomotive puts out in a week…as well as many others that think that 100 years of burning some coal and oil have made as big a dent into the over all temp of the planet dont seem to remember that vocanos put more CO2 into the air in one day then all of the coal fired power plants… if someone wants to tell me that need to cut down on my “green house gas or carbon foot print” then say it from the back of a horse drawn wagon with a hand crancked electrical dynamo used to run the PA system…and actuly live the lifestyel the “preach” then then i might actuly take them somewhat seriousely…but till then… i dont and wont…
the earth has been around a heck of alot longer then man…t
Cap and trade is a complex financial shell game that will be the law of the land before most Americans have any idea what it is. It will have the effect of nationalizing all U.S. energy production and consumption, which will be tantamount to nationalizing all business that produces carbon. It will very significantly drive up the price of electricity, natural gas, coal, and oil. I think that this would not have a chance of coming to fruition if everybody understood the big picture.
There is a link to one pitch for the cap and trade system but I hesitate to post it because my intent is not to make a political pitch for a candiate who advocates or opposes cap and trade. Although I don’t know of any that oppose it. Suffice it to say that the plan advocated is breathtaking in its scope and ambition.
Here is a little taste from the link just to give a feel for the scope:
Emissions Permits Will Eventually Be Auctioned To Support The Development Of Advanced Technologies. A portion of the process of these auctions will be used to support a diversified portfolio of research and commercialization challenges, ranging from carbon capture and sequestration, to nuclear power, to battery development. Funds will also be used to provide financial backing for a Green Innovation Financing and Transfer (GIFT) to facilitate commercialization.
Here is one of the ways that they are going to mitigate any economic cost to us:
Early Allocation Of Some Emission Permits On Sound Principles. This will provide significant amount of allowances for auctioning to provide funding for transition assistance for consumers and industry. It will also directly allocate sufficient permits to enable the activities of a Climate Change Credit Corporation, the public-private agency that will oversee the cap and trade program, provide credit to entities for reductions made before 2012, and ease tr
Unfortunately political thinking involves finding someone or some company that has found a way to make money quite legitimately and making up rules so it winds up in the politicians hands to disperse to people who are totaly beholden to the politicians. Thus the end result is self preservation of the political class and screw everybody else.
Hmm, remember that if you have a million gallons of diesel but no carbon credits, then the diesel is actually a liability not really an asset, the carbon credit is more valuable. To a degree it should lower the price of the fuel. Of course there will be people who would illegally exceed their cap. A reduction in the Carbon Emissions to 80 percent of current means a reduction of fuel usage by the same amount. The major difference is that the Carbon Emission Credit is not tied to a particular fuel. An electric utility burning coal can buy a credit from a trucking company burning diesel or vice versa.
They are part of the industrial scene here in Europe and yes there have been bugs in the system (grandfather rights etc.). The airlines are currently lobbying very hard as they maybe included in the scheme in 2012.
As for economic disaster - well the lights are on here and I am typing away, so the world keeps turning on this side of the Atlantic.
What the linked paper stated was that the diurnal temperature difference increased, not necessarily that the ground temperature increased. The article also stated that the outgoing long wave radiation (i.e. thermal radiation) increased during the no-fly days - which is the same effect that you would get from reducing greenhouse gas concentrations. I am not sure if the increased albedo does or does not make up for the increase in the attenuation of outgoing thermal IR. This may end up being a real headache for the airline industry (and may be a great opportunity for High Speed Rail).
The airline industry will be hit a lot harder than the RR’s by any reasonable carbon credits legislation, since the airlines consume more fuel than the RR’s. I will note that it is extremely dangerous to use the words reasonable and legislation within a few paragraphs of each other.
I’m going to respectfully disagree with your accounting…
A million gallons of diesel fuel will always remain an asset. Saying it will become a liability if the fuel owner doesn’t have the carbon credits to use it is like saying a company with a million golf balls has a liability because it has no golf clubs.
No, it just has to sell the golf balls to someone with golf clubs. Same same with the fuel, it will eventually get sold to someone with cabon credits who can use it.
As to the credits reducing the cost of fuel, I don’t think so. Right now, the cost of fuel is what the railroad pays for the fuel. With the carbon credit thingy the cost of the fuel will be what the railroad pays for the fuel PLUS what the railroad pays (OR FOREGOES) for the carbon credit.
First, the railroads will be ordered by the government to reduce fuel usage. Then this FOREGO thingy will raise its ugly head. The railroads have to evaluate each service they offer against the cost of providing that service. Carbon credits will increase the cost of service because the railroad will have to do the evaluation calculating what they could have sold the credits for as part of the cost. (They FOREGO the credit sale to use the fuel.)
This will put an end to an unknown number of rail&nb
Say you have a million golf balls and all the clubs you need. Then someone steals all your clubs and offers to sell them back to you. You then have the choice of buying back your clubs or selling your balls. In any event, it made golf more expensive.
Greyhounds, you don’t think that the run up in the price of the fuel is already having that effect? Whatever the cause, whether its high fuel prices or a Carbon Cap, transportation is getting more expensive and people and companies will have to adjust.
The current run-up in fuel prices is affecting all businesses, but it has nothing to do with carbon credits because no federal cap and trade system has yet been imposed. However, it is right around the corner unless enough people oppose it. But beware. Opposing cap and trade means you hate polar bears.
Carbon credits are like a new kind of currency that will be printed up and distributed by the government. The premise is that there is too much CO2 being emitted, so CO2 emitters must reduce their emissions. In order to make the burden of reduction fair, the government will establish the very basic principle that every human unit has an equal right to emit an identical amount of CO2. The government will then distribute the carbon credits equally to represent that equal right. Entities that produce a lot of CO2 (directly or indirectly) are going to need more credits than their fair allotment. And entities that produce little CO2 are going to have excess credits that they do not need.
Therefore, the entities that produce a lot of CO2 will need to either stop producing in excess of their allotted credits, or buy extra credits from those who have a surplus. For instance, small businesses that make candles might not make much CO2 so they can sell their excess carbon credits to say the Union Pacific Railroad, for instance.
I don’t think the fuel run up has had a significant adverse impact on the railroads. Yet. There’s been some traffic loss, i.e. fewer new automobiles to haul, but, in general, the railroads have been able to pass their increased costs along via fuel surcharges. This does make transportation more expensive to the shippers, but transportation expenses are minimal elements of the overall cost of producing most things. (exception: low value bulk commodities that must move long distances.)
The airlines, however, are sucking wind because they use more fuel to do their work and can’t seem to pass the increased costs along:
The airlines are now behaving exactly as I forsee the railroads being forced to behave if Carbon Credits become the law of the land. They’re cutting at the margins - eliminating the flights where costs now exceed revenues.
If carbon rationing is based on current industrial output, what does that do to potential startups let alone an industrial corporation that wants to expand? Say if someone wanted to build a brand new railroad, say an independently owned bridge line between two major Midwest cities. Would they have to purchase carbon credits before they were even allowed to move a single ton/mile of freight?