The document summarizes the proposed Cap and Trade bill, which aims to control carbon dioxide emissions through a system of taxing and trading emission allowances. It would establish an overall emissions cap and issue allowances that entities could trade if their emissions reduction costs are higher than others. However, the proposal is criticized for giving the government too much control over energy production and use. It could devalue real estate and burden individuals, businesses and governments with high compliance costs.

1. 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

2. CAP AND TRADE
CONGRESSIONAL TITLE: H.R. 2454
BILL TITLE: American Clean Energy
and Security Act of 2009
AKA: WAXMAN-MARKEY Cap and
Trade Bill

3. CAP & TRADE
The most sinister program to come
from Washington since the Income
Tax and Federal Reserve Act

4. Genesis of Cap & Trade
• Clean Air Act of 1980
• Reinvestment Act of 2009
• Energy Department Initiatives
• EPA Initiatives

5. 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.

6. 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

7. 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).

8. 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.

9. 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

10. 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.

11. 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

12. 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

13. 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!

14. 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.

15. 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

16. 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.

17. 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.

18. 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.

19. 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.

20. 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.

21. 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.

22. 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.

23. 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.

24. “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

25. 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