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*Terence Corcoran: Trillion-dollar black holes* NP Editor, National Post Wednesday, Oct. 14, 2009 [linked image] *The costs of climate control dwarf the financial crisis * *By Terence Corcoran* T here is much concern in financial markets about exit strategies. How are central banks and governments going to dig themselves out of their multi-trillion dollar monetary and fiscal stimulus holes? Frankly, it’s too late now to start worrying about that problem, which in any case is easily fixed: tax increases. Far more worthy of attention, before it’s too late, are the new mile-deep spending regimes governments are preparing to cover the cost of new climate change policies. And guess how they will get out of those trenches. The green jungle drums are already at full volume in preparation for the Copenhagen climate policy extravaganza, even though the two week negotiation marathon isn’t set to open until Dec. 7. From now till mid-December, our days and nights are going to be filled with dark nightmares of global warming and bright utopian visions of the greatest reordering of economic activity since the industrial revolution — except run in reverse. No citizen of the world will be able to escape the run-up to Copenhagen where, one way or another, catastrophe looms. At Copenhagen, the United Nations’ Intergovernmental Panel on Climate Change will attempt to get about 140 nations to approve a new global plan to reduce carbon emissions and, at the same time, engineer a major redistribution of money from developed nations to developing nations. An early draft of the Copenhagen agreement, to replace the collapsing Kyoto Protocol, suggests the focus is as much on redistribution as on carbon reduction, with no guarantee that any of it will have the slightest impact on carbon emissions or the global climate. In climate policy circles, trillion-dollar transfers and programs proliferate and, in total, easily overtake the paper losses suffered by financial markets through the 2008 crisis. The International Monetary Fund recently set its estimate of the global losses from the financial crisis for 2007-2010 to be US$3.4-billion. The draft Copenhagen document proposes annual “financial flows” to developing nations of somewhere between $70- and $140-billion. At $140-billion, the ten-year tab would run to $1.4-trillion. But forcing carbon-based energy out of the global economy will take a lot more than that. The International Energy Agency, created decades ago to keep cheap oil flowing, is now dedicated to slowing it down and making it very expensive. In its latest World Energy Outlook report, the IEA estimated that a global attempt to reduce carbon emissions “will increase cumulative energy-related investment over the period 2010-2030 by $10.5-trillion.” On top of that the IEA envisages carbon taxes of between $50 and $110 a tonne; depending on how much of global carbon emissions are subject to carbon taxes or cap-and-trade programs, the carbon tax burden could easily exceed $1-trillion a year. This week, in a second report, the IEA unleashed another money spinner, a global estimate of how much it will cost to develop carbon capture and storage. As with all climate reports, this one must levitate itself to new heights of urgency. “There is a growing awareness of the urgent need to turn political statements into concrete action.” Current energy use is “patently unsustainable” and it will “take an energy revolution and low-carbon energy technologies” to save the world from crisis. Plus it will take more trillions of dollars . Carbon taxes of $100 a tonne will not provide enough financial flow to feed the carbon capture beast. The IEA report calls for OECD governments to increase funding to “an average annual investment of $3.5-billion to $4-billion from 2010 and 2020.” This money is just to provide “demonstration projects” to prove that taking carbon and storing it underground actually works and doesn’t blow up as an environmental horror. Another annual commitment of up to $2.5-billion will be needed to establish “new financing strategies” for non-OECD developing regions. That money would be run through whatever mechanisms and agencies are set up at Copenhagen to redirect, redistribute and recycle rivers of cash. For North America alone, the IEA estimates carbon capture investments of $1.1-trillion. Globally, the number balloons to as high as $3.4-trillion. Along with other IEA carbon control cost estimates and the Copenhagen effort, plus uncountable and unmeasured other burdens on industry and consumers, the cost of the great anti-carbon revolution will eventually dwarf the costs of the financial crisis to global markets, even including government budget deficits and central bank red ink. The big difference between the financial meltdown losses and carbon control spending is that the financial market losses are paper losses that, in time, will turn around. The IMF said the financial markets have already recouped 15% of their losses as securities values rebound. The carbon spending, if it were to take place, would be lost money never to be recouped. An expenditure of $3.4-trillion to pump carbon into the ground is $3.4-trillion vapourized into black holes. The Copenhagen-based platform for these trillion-dollar economic schemes is being drafted at a time when many nations are already reeling — and when there is growing doubt about the validity and credibility of the science. Will the politics follow the dismal and risky economics and science of climate policy at Copenhagen? Whatever happens, catastrophe looms. If Copenhagen adopts extreme targets and objectives, the world economy will face more trillion dollar crises. If Copenhagen fails, the catastrophe will fall on climate change activists and their political proponents. Either way, it won’t be pretty. --~--~---------~--~----~------------~-------~--~----~ Thanks for being part of "PoliticalForum" at Google Groups. For options & help see http://groups.google.com/group/PoliticalForum * Visit our other community at http://www.PoliticalForum.com/ * It's active and moderated. 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