Adam Smith would smile. The latest iteration of the old mercantilism now links, in a ridiculously appropriate way, the faeces of Kansas cows with the green activism of California lawmakers. As part of a ‘we should have seen it coming’ development, California’s low-carbon fuel standard to plan encourages Kansas dairies to sell—No kidding-–cow methane to Californian industrialists. Talk about a (ahem) bargain…
The idea, while technically feasible, is not what you might hope for, i.e. rational commercial use of an otherwise wasted by-product. No, this regime is rather the result of a purely artificial tinkering of the market by deadly conceited bureaucrats who pursue a self-proclaimed crusade on carbon emissions. And, unsurprisingly, some companies are complicit, crudely illustrating Smith’s Warnings on the eagerness of corporations to come to terms with government policy makers:
Expanding the market and reducing competition is always in the interest of the [business] merchants… The proposal of any new law or regulation of commerce which comes from this order, should always be listened to with great precaution, and should never be adopted except after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same as that of the public, who generally have an interest in deceiving and even oppressing the public, and who have therefore, time and time again, both deceived and oppressed.
It’s unclear exactly how (or if) corporations and policymakers got along, but the end result is pretty clear: Taxpayers will pay a huge price, politicians will be credited for “addressing” the climate issue, and large corporations will do just fine. well pretend to do his part.
Here’s how it works:
California has imposed carbon emission caps in an effort to reduce greenhouse gas emissions to politically determined targets (regardless of those targets’ questionable effectiveness, This is an other story). Knowing, however, that mandatory reduction allowances would further weaken California’s trading environment, it instead allows a nominal “free market” trading system in which high-emitting industries buy offset “credits” to other agents that may be found to reduce their emissions of a proportional amount.
For a truly chilling look inside this beast’s belly, MIT’s Technology Review did a deep dive– spoiler alert, many programs actually incite the increase in broadcasts. That aside, in some ways the program makes vague sense in theory: the rise in total gas emissions is stagnating. Such a system, after all, arguably helped reduce sulfur dioxide emissions a generation ago (a much clearer threat than carbon dioxide, but again, that’s another story).
However, the real issue here is not so much reducing carbon emissions as At what price and who benefits? Enter the humble Kansas dairy cow. For some scales of factory ranchers, California’s carbon credits are juicy enough to justify spending the large sums needed to install digesters capable of collecting, breaking down and siphoning methane that would otherwise be lost to the atmosphere in lagoons at traditional manure. . The captured methane is compressed and ultimately injected into natural gas grids that are linked, even tangentially, to targeted reductions in the Golden State.
This would all be fine if it actually made general financial sense. But like the riddle wrapped in a riddle, it’s a Ponzi scheme wrapped in a shell game. In this case, a real, literal Shell game. Shell, USA, a subsidiary of former oil conglomerate Royal Dutch Shell, has been credibly accused of having greenwashing campaign, spending $55 million a year on “eco-branding” its image. It is, in fact, the source of capital investment for the Kansas Methane Concentration Plant, which is part of its “Downstream Galloway” biomethane program. Shell is not fooled: it will sell the credits of its carbon offset program (“Renewable Compressed Natural Gas”) to the Californian stock exchange, thus whitewashing its image at the expense of the Californian taxpayer while recovering its down payment in just a few years. (I tried calling their information line to find out how long exactly, but it was disconnected…)
The deception, such as it is, is to swindle California citizens to “fight climate change” while lining the pockets of the big Midwest farm unions and their partners in the oil industry. Not that I blame the dairy farmers or the oil companies, mind you: as businessmen they react to price signals and opportunities, however ridiculous, as much as any of us . On the contrary, I blame lawmakers for not seeing the absurd implications of their welfare policy. And, to the extent that corporate interests were involved in promoting the legislation, for failing to heed Adam Smith’s advice to “examine carefully…with the most suspicious attention” schemes that deceive and invariably oppress the public.
It is perhaps ironic that California’s climate policy encourages further industrialization and centralization of an increasingly consolidated agricultural industry. Now we have a heavily subsidized dairy industry, paid at taxpayer expense to develop ever-larger dairies that create (amongst other things) ever-larger disposal problems like giant manure lagoons. Now these same dairies can extract further away taxpayer funds by collecting gas from these lagoons and selling it back to oil companies so companies can comply with a taxpayer-funded climate cap. It’s hard to tell who treats whom.
The one thing that seems certain in this convoluted mess is Adam Smith’s age-old warning:
“There is no art that one government teaches another sooner than that of extracting money from the pockets of the people.
Paul Schwennesen is director of the Agrarian Freedom Project which seeks to promote the values of prosperous and self-sufficient agriculture. A graduate of the US Air Force Academy and Harvard University, he completed a doctoral thesis in environmental history on 16e Century Spanish “The Breeding of Conquest.” He served ten years in the Air Force, including a tour of Afghanistan. A fervent defender of freedom, he has just returned from two missions to Ukraine and was recently awarded the Verkhovna Rada Medal by the Ukrainian Parliament for his actions there. His writing has appeared in the Liberty Fund, American Institute of Economic Research (AIER), PERC Reports, New York Times, American Spectator, and Claremont Review of Books.