S. 2877: The CLEAR Act

I intially dismissed the CLEAR act as yet another cap-and-trade bill, but upon reading the writeup on the Tiny Ouroboros and watching the silly promo video, I decided to give its much touted 39 pages a read, as it sounded to go directly towards energy producers rather than other manufacturers. And I must say, for a mere 39 pages, it was full of some of the thickest legalese I have seen in quite some time.

First thing I found interesting, with the press this has been getting of late, is that it was introduced in December of last year. So it’s been in committee awhile. It appears at this point, no revisions have been made. Onto the content:

First thing that strikes me is the acronym. “The Carbon Limits and Energy for America’s Renewal (CLEAR) Act.” Rule of thumb, don’t trust any legislation with a cute acronym.

First thing I noticed was the lengthy definitions section. Even the lengthiest of bills seldom have a definitions section of this length. Reason it seems this section is so long is the bill is full of the terms defined here, making it near impossible to read without frequently cross referencing the definitions.

So to summarize the bill here’s what happens:

“First Sellers,” anyone who produces or imports fossil fuels, bid on “carbon shares,” the right to sell fuel with the equivalent of 1 ton of carbon dioxide, from the Secretary of the Treasury. The initial number of shares starts with the estimated need, and is gradually reduced.

A portion of the proceeds are distributed in terms of dividends. The video says 75% of the proceeds will go towards that, but I found no such figure in the bill.

25% of the proceeds (and I did indeed find this figure), is distributed in loans and grants towards a whole bunch of environmental stuff.

On the surface, it doesn’t seem like a bad idea to get the U.S. off fossil fuels. And here’s where I speculate the problems.

The first problem comes in the bidding process. While there is a limit on the carbon shares initially sold, if the maximum bid price is reached, more are made available:

(B) SAFETY VALVE SHARES- If the safety valve price is reached in any 1 auction conducted under paragraph (1), the number of available carbon shares may be increased to exceed the aggregate quantity described in subsection (a)(2) to ensure that all legal bids at the safety valve price can be accommodated for the 1 auction.

So what does this mean? It means that if the big producers collude, they will realize that by bidding the price up to the safety valve price, they can make it too expensive for their smaller competitors to compete, thus eliminating them from the competition, as well as making more carbon shares for them to use, accomplishing nothing in reducing usage and emissions, and increasing the price of energy. This, of course, will be passed on to the customer.

Fuel sold without shares imposes a fine of five times the cost of the shares necessary to cover the fuel, thus creating another way to continue selling, affordable to the big companies but unaffordable to the smaller ones, further killing the small companies and achieving nothing in reduction of emissions:

5) PENALTY FOR NONCOMPLIANCE-

(A) IN GENERAL- Any first seller that fails to surrender a sufficient number of carbon shares for the fossil carbon that the first seller introduced to the United States market by not later than 2 years after the date on which the fossil carbon becomes covered fossil carbon shall be liable for payment to the Secretary of a penalty in the amount described in subparagraph (B).

(B) AMOUNT- The amount of a penalty required to be paid under subparagraph (A) shall be equal to the product obtained by multiplying–

(i) the number of carbon shares that the owner failed to surrender by the deadline; by

(ii) 5 times the carbon share price set at an auction described in subsection (b), the date of which is closest to that of the sale of the fossil carbon subject to a noncompliance penalty.

Now this is supposed to be negated by the dividends and grants, but it is uncertain whether or not the size of these dividends and grants will be sufficient to cover the increase in cost. I am no economist, so I cannot say.

Now the good news in this is that a portion of those dividends and grants go towards green energy and the like. However, which individuals and companies that get that money seems to be decided by the Clean Energy Deployment Administration, whoever that is.

In the end, it seems to me this bill has enough loopholes that the only people who will benefit are the large fossil fuel producers.

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