The ultimate irony - George Bush slashes worldwide carbon emissions

If you think that deserves the Enron prize for accounting, wait until you take a good look at the federal government’s proposed emissions trading scheme (ETS).

Tim Colebatch did and discovered one little word undoes the PM's claims on greenhouse gases:

We all think the Rudd Government's emissions trading scheme will cut Australia's greenhouse gas emissions by 5 per cent relative to 2000 levels - right? No, we're wrong.

Treasury modelling estimates that even with a cleaner, more effective model than the one now adopted, Australia's emissions in 2020 would rise 5.8 per cent above 2000 levels. We would pump out more emissions in 2020 than we do now.

It's an ugly reality that exemplifies why the Government's model is doomed to fail. It promises change, but tries to shield everyone from all the points that drive change.

... There's a crucial point we all overlooked. Labor has not committed Australia to cut its emissions by 5 per cent, but to cut its emissions allocation by 5 per cent. And that is very different. In 2000, Australia emitted 553 million tonnes of greenhouse gases. In 2020, the Government will allocate permits for 525 million tonnes of emissions. But even before ... changes weakened the scheme, Treasury estimated that Australia would emit 585 million tonnes.

The key to it is that the scheme allows companies to use unlimited numbers of permits from other countries instead of our own. And the permits we import will be subtracted from our emissions tally.

They would come from other Western countries or (more likely) from developing countries, under rules such as the Kyoto Protocol's clean development mechanism (CDM), which allows Western companies to buy permits for emissions saved in developing countries by using cleaner technology. A noble idea, unfortunately it has proved easy to rort.

So when industry groups and the big fossil fuel suppliers whine in the media about a 5 per cent cut being too big, what they’re actually saying is that a 5.8 per cent increase in emissions is simply not big enough.

Not only will Australian emissions increase, emissions from those countries we buy permits from for their “reductions” will also increase because the cleaner technology introduced does not have to actually replace some existing dirtier technology. The new technology may be a cleaner than before, but its emissions are still adding to the total emissions of that country.

So the total emissions in Australia go up, the total emissions in the rest of the world go up, but we create a carbon-credit and pretend, Enron style, that everyone’s emissions have gone down.

Rather than point out the Orwellian nature of the ETS’ “reductions”, environment groups play along with the government’s deception and argue that the 5 per cent “cuts” aren’t large enough, instead of pointing out that the ETS will actually increase emissions.

Enter George W. Bush & Co.

While George wasn’t the slightest bit interested in cutting greenhouse gas emissions, eight years of his presidency have resulted in the credit crisis which looks set to decimate worldwide productivity and perhaps result in the first reduction in atmospheric CO2 emissions since the industrial revolution.

Nouriel Roubini, an economics professor at New York University, is now famous in economic circles for being one of the first to predict the present credit crisis well before it happened, the root causes of which go right to the policies adopted by Bush.

In his article The decline of the American superpower, Roubini set out the main reasons for the credit crisis, which have the fingerprints of Bush all over them:

The US squandered its economic and financial power by running reckless economic policies, especially its twin fiscal and current account deficits. The last time around the current account started to go into negative territory in 1991 after a brief surplus during the 1990-91 recession. In the 1990s the growing US current account deficit was driven by a private investment boom - the internet technological revolution - and thus the accumulation of foreign liabilities of the US was driven by FDI and M&A activity, i.e. the US accumulated foreign liabilities in the form of equity rather than debt. But since 2001 the further worsening of the US current account deficit was driven instead by growing fiscal deficits - especially in the 2001-2004 period - caused by unsustainable tax cuts and by the buildup of spending on foreign wars and on domestic security and since 2002 by the collapse of household savings and boom in investment in unproductive stock of housing capital that the housing bubble induced ... By now the US is the biggest net borrower in the world - running current account deficits still in the 700 billion dollars range - and the biggest net debtor in the world with its foreign liabilities now over 2.5 trillion dollars.

However to be fair, even Bush alone couldn’t engineer this mess by himself. Since President Bill Clinton repealed the Glass-Steagall Act in 1999, the markets have been reconfigured according to an entirely new model, “structured finance”. Glass-Steagall was the last of the Depression-era bulwarks against the merging of commercial and investment banks. As a result banking has changed from a culture of “protection” (of deposits) to “risk taking”, which is the securities business. Through “financial innovation” the investment banks created myriad structured debt instruments which they sold through their Enron-like “off balance” sheets operations. They are steadily losing value with every rating downgrade.