Posts Tagged ‘Waxman’

Does the Climate Bill Have A Chance?

Sunday, May 9th, 2010

Here’s my little Op-Ed on the lessons of former emissions broker Anne Sholtz, who defrauded the very smog cap-and-trade she helped concoct. We write about her spectacular and alarming escapades at length, as well as about L.A.’s air pollution market, in Smogtown: the Lung Burning History of Pollution in Los Angeles.

“In the toxic air of Los Angeles is a primer on human nature as we debate a national cap-and-trade for greenhouse gases.

During the 1990’s, Southern California manufacturers, weary of decades of stern regulation, wanted a new way to shrink their emissions of sky-smudging, health-damaging oxides of nitrogen and sulfur. Their answer was the planet’s first smog cap-and-trade system. Its name was awkward — the Regional Clean Air Incentives Market, or Reclaim — but its implications seismic. Industry finally had flexibility in achieving its cuts, and a motive to reduce more than their yearly pollution cap. They could sell unneeded “credits” for profit!

Though environmentalists caterwauled about corporate sellout, the anti-smog officials were on board. For years, they’d been sandwiched between federal clean air mandates and industry accusations that they had crippled the region’s manufacturing muscle with overzealous rulemaking. Why not allow the market to be the magic?

Leading this vanguard environmentalism was Anne Masters Sholtz, a 30-something Caltech economics professor and aspiring emissions-broker. Her brokerage, which used the Web and advanced software to match trades, lined up heavyweight clients and enlisted marquee financial institutions as trade clearinghouses. Sholtz bought a spectacular hillside estate, won niche celebrity, and had a seemingly blue-sky future in the mecca of whiskey-brown air.

The problem is the system was vulnerable. During California’s electricity brownouts in 2000 and 2001, speculators made a killing off the boutique, $90-million-a-year market by hoarding credits the utilities needed to run full time. By then, Sholtz had twice fleeced the system.

In 1996, she misappropriated roughly $2 million in credits belonging to Chevron, then Mobil Corporation and another client and sold them to Southern California Edison. A few years later Sholtz lulled another client, a New York-based trading outfit called A.G. Clean Air, into believing she owned credits the company needed to complete a lucrative trade with Mobil. In truth the credits weren’t available.

Predictably, local regulators were in the dark about both episodes until industry complained to them. As her case illustrates, and Europe’s cap-and-trade scandals corroborates, even the best-intentioned oversight is laps behind sophisticated schemers, be they full timers or just desperate like Sholtz. Concoct a market anywhere, whether for beads or subprime mortgages, and they’ll show up.

Two House Republicans today are moving to unseal court records of Sholtz’s federal prosecution in a ham-fisted effort to hurt President Obama’s chances for a carbon market. If there’s chicanery with smog, imagine a trillion-dollar greenhouse market, they say. But the Sholtz case is too important for politicization, because global warming is a global threat now.

I’m against Obama’s plans because a more straightforward carbon levy seems more cost-effective and less contrived. Yet cap-and-trades can work, as they generally have in L.A., as long as we remember that to make a commodity out of something is to arouse temptation.”

To read the entire New York Times “Room for Debate” online forum, click here.

Here’s the link to my last story about Sholtz and L.A.’s cap-and-trade. It’s a tale of environmental fraud and foreign intrigue unlike any others.

AIR OF DECEIT Anne Sholtz & “Operation Bald-Headed Eagle:” a cap-and-trade tale unlike any other

Thursday, August 20th, 2009



August 20, 2009

By Chip Jacobs for the Pasadena Weekly

The demise of Anne Sholtz’s once-grand life is evident in the smaller things. It’s there in the GPS-tracking bracelet — standard issue for felons in home detention — that looped around her ankle for a year, and in her near-dormant passport. It’s traceable in her pillow, which rests today in leased home miles from the $5-million hillside estate that had broadcast her transformation from Caltech economist to business phenom.

Yes, the wreckage from that existence — the economizing, the isolation from connected friends who now shun her — is graspable.

Where the picture turns as murky as whisky-brown Southern California smog is how Sholtz, as a then-thirtysomething go-getter, was able to deceive the very air-pollution market she helped conceive, and the lessons that holds for keeping financial crooks out of the trillion-dollar, greenhouse-gas trading system that President Obama has trumpeted as a key to curbing global warming.

Unless you’re in the arcane field of emissions trading, chances are you’ve probably never heard of Sholtz before. Last April, the former Pasadena emissions-broker was convicted in federal court of fraud relating to a multimillion-dollar deal for credits in Southern California’s novel smog-exchange. Despite pleas that she sock Sholtz with years behind bars, US Central District Court Judge Audrey Collins gave her just a year in home confinement.

Fortunate with a light sentence in that downtown LA courtroom, Sholtz nonetheless sustained heavy losses outside of it, squandering, among other potential, her chance to build a unique and lucrative pollution-trading business, with access to Obama or Gov. Arnold Schwarzenegger as an industry confidante. Those opportunities gone, she now drives her mother’s car, not the Mercedes or SUV she once did. Rather than expanding her ideas into climate change, she checks in with her parole officer.

Blown prosperity for Sholtz, it’s been no bonanza for others, either.

Between criticism over its secretive, mixed-bag prosecution of her and evidence of Sholtz’s role in a scheme to extract millions in overseas US aid with men purporting to be American intelligence and military operatives, the Department of Justice’s LA office probably wishes she would just fade away. Local smog regulators at the South Coast Air Quality Management District (AQMD), whose market-based regulation proved vulnerable to her deceptions, can relate.

Trouble is some events are just too big to disappear. And the Sholtz case, no matter its relative obscurity or connection to complex regulations, fits that mold because it underscores the need for vigorous oversight of emissions markets against seemingly inevitable Wall Street-style chicanery.


Monday melange — President Obama’s greenhouse gas market/energy revolution debated, and new revelations about the toxic qualities of good, old smog

Monday, June 29th, 2009


From the L.A. Times story about the House’s passage of the so-called Waxman-Markey bill:

” … It’s the most important environmental and energy legislation in our nation’s history,” said Fred Krupp, president of the Environmental Defense Fund. “A huge achievement.”

Passage is far from certain. Democrats are balking. Read this Wall St. Journal story.

But passage could prove trickier in the Senate, where many Democrats hail from coal, farm or factory states, and where the bill probably would need 60 votes to advance. The Senate product is likely to emerge from a combination of bills passed by the energy and the environment and public works committees, further complicating the negotiations.

After the House vote, Obama expressed confidence that the Senate would rise to the challenge, portraying the debate as one between supporters of the status quo and those who want to position the United States as a leader in the 21st century economy.

Less-aggressive climate bills have failed in the Senate in recent years, but Democratic leaders in the chamber have promised to move swiftly this year, debating a measure as early as September or October. And they cheered Friday’s vote as an important step.

How it’s supposed to all work: a Q&A

Smog and auto emissions and public health …

Fetal brains and carbon monoxide: the UCLA study.

Premature babies and freeway emissions: the story.

Air pollution and cancer risk. Link.

Greenhouse gas cap-and-trade part II: avoid handing out too many credits or you’ll achieve nothing

Thursday, June 25th, 2009

From the L.A. Times Op Ed by filmaker/activist Todd Darling:

” … USCAP’s carbon-trading plan, which became part of the Waxman-Markey plan, shares key details of the European system — most importantly, it gives 85% of the pollution credits to the biggest polluters for free.

The European experience shows the critical weakness of this plan. In Europe, the distribution of free pollution credits to industries failed to establish a strong carbon market. In turn, the weak market in carbon credits failed to generate the money needed to fund new technology. And because there was a glut of free credits, polluters that went over the emissions limit could buy the necessary credits cheaply. So important states, such as Britain, continue to exceed the pollution limits.

Faced with disappointing results, Europe began auctioning off more of the credits in 2006. But the damage was done. The arrival of the recession caused the “carbon price” to plummet further. Critics point at companies that cut back their production 20% — and therefore pollute 20% less because of the recession — and now sell their unused pollution credits to prop up their bottom line. Money that was supposed to be generated from pollution credits to fund clean technology goes elsewhere.

The complex European trading scheme, started with free pollution credits, has not produced dramatic cuts in pollution or dramatic developments in technology or a robust market in carbon credits. The Financial Times of London was blunt: “Carbon markets leave much room for unverifiable manipulation. [Carbon] taxes are better, partly because they are less vulnerable to such improprieties …”

Meanwhile, a majority of Americans support carbon-cutting, even if means higher energy costs, according to the Washington Post. The enthusiam wanes, though, when it comes to achieving emission cuts using cap-and-trade.

Debate over the price of President Obama’s proposed greenhouse-gas market – a.k.a. “cap and trade” – heating up

Wednesday, June 24th, 2009


From acclaimed economist columnist Paul Krugman in the New York Times:

“A while back I wrote about anti-green economics — the insistence, by opponents of policies to reduce greenhouse gas emissions, that the economic cost of cap-and-trade would be immense and unsupportable. I cited Robert Samuelson, who ridiculed the Environmental Defense Fund for suggesting that major action on greenhouse gases would only cost a dime a day per person …”

Congressional Budget Office assessment of the costs of President Obama’s proposed cap-and-trade:

“… The Congressional Budget Office (CBO) estimates that the net nnual economywide cost of the cap-and-trade program in 2020 would be $22 billion—or about $175 per household. That figure includes the cost of restructuring the production and use of energy and of payments made to foreign entities under the program, but it does not include the economic benefits and other benefits of the reduction in GHG emissions and the associated slowing of climate change. CBO could not determine the incidence of certain pieces (including both costs and benefits) that represent, on net, about 8 percent of the total. For the remaining portion of the net cost, households in the lowest income quintile would see an average net benefit of about $40 in 2020, while households in the highest income quintile would see a net cost of $245. Added costs for households in the second lowest quintile would be about $40 that year; in the middle quintile, about $235; and in the fourth quintile, about $340. Overall net costs would average 0.2 percent of households’ after-tax income …”

An energy revolution is coming to America. It’s important to bone up on it, and here is a summary of the plan Obama wants in the form of the so-called “Waxman-Markey” legislation.

Lastly, a terrific Op-Ed in the L.A. Times by local writer Greg Critser about “inhaling a heart attack,” a subject we cover in detail our social history of the “great” Southern California air pollution crisis, Smogtown