Fertilizers, Methane and Mercantilism – EconLib

Adam Smith used to laugh. The latest iteration of old-fashioned mercantilism now links the Kansas cow poop issue with the green activism of California legislators in a comically appropriate way. In a “we-should-see-coming” development, California’s low carbon fuel standards plan is encouraging Kansas dairy to sell—no nonsense--Cow methane to California industrialists. Talk about a (ahem) breeze…

The idea, while technically feasible, is not what you might expect—that is, a rational market use of an otherwise wasted by-product. No, the scheme is rather the result of purely artificial market tinkering against a self-proclaimed crusade on carbon emissions by lethally arrogant bureaucrats. And, not surprisingly, some businesses are involved, crudely exemplifying Smith’s warning about business’s eagerness to collude with government rule-makers:

Widening the market and narrowing the competition, is always a matter of interest [business] Dealers…Any proposal for new laws or regulations of trade coming from this order should always be listened to very carefully and not accepted until it has been long and carefully examined, not only with great discretion, but with the most suspicious attention. It comes from an order of men, whose interests are never exactly the same as those of the public, who are generally interested in deceiving and even oppressing the public, and who have accordingly in many cases both deceived and oppressed.

It’s a bit unclear exactly how (or if) business and policymakers collude, but the end result is clear enough: taxpayers will bear a huge price tag, politicians will get credit for “dealing” with the climate problem, and big business will do its share of the good. Pretend to do.

Here’s how it works:

California has imposed carbon emission caps in an attempt to reduce greenhouse gas emissions to politically set targets (never mind the questionable effectiveness of these targets, that’s another story). However, knowing that mandatory reduction quotas would further weaken California’s business environment, it instead allows a nominally “free-market” trading scheme in which high-emitting industries purchase offsetting “credits” from other agents who can prove less. their A consistent amount of emissions.

For a truly terrifying look inside the belly of this beast, MIT’s Technology Review took a deep dive—spoiler alert, many of the programs actually encourage growth Aside from that on emissions, in some ways the program seems vaguely plausible in theory: growth in total gas emissions flattens out. Such a plan, after all, helped reduce sulfur dioxide emissions a generation ago (a much more obvious threat than carbon dioxide, but again, that’s a different story).

The real question here, however, is not so much about reducing carbon emissions at what cost And who are benefiting? Enter the humble Kansas dairy cow. For industrial livestock producers of a certain scale, California’s carbon credits are lucrative enough to incur the significant costs required to install digester-tanks that can collect, break down and siphon methane that would otherwise be lost to the atmosphere in traditional manure lagoons. . The captured methane is compressed and ultimately fed into the natural gas network, which links, albeit tangentially, to the Golden State’s targeted reductions.

All of this would be fine if it actually made some kind of broad financial sense. But like a puzzle wrapped in a puzzle, it’s a Ponzi scheme wrapped in a shell game. In this case, an actual, literal shell game. Shell, USA—a subsidiary of the former Royal Dutch Shell oil conglomerate—has been credibly accused of a vigorous greenwashing campaign, spending $55 million a year on “eco-branding.” It is, in fact, the source of capital investment for the Kansas methane concentration plant, part of its “downstream Galloway” biomethane program. Shell is no fool: It will sell credits from its carbon offset program (“renewable compressed natural gas”) on the California exchange, thereby greenwashing its image at the expense of California taxpayers while recouping its capital costs in just a few years (I tried ) to call their data line for just how long, but it’s disconnected…)

The hoax, such as it is, is lining the pockets of large Midwestern agricultural syndicates and their partners in the oil industry to get California citizens to “fight climate change.” Not that I blame dairy operators or oil companies, mind you: as traders, they react to price signals and opportunities, however ridiculous, just like the rest of us. Rather, I blame legislators for failing to see the unintended consequences of their common-sense policymaking. And, to the extent that corporate interests were involved in promoting the law, Adam Smith’s advice was to “examine carefully…with the most suspicious attention” schemes that invariably deceive and oppress the public.

It is ironic, perhaps, that California’s climate policy is encouraging further industrialization and the concentration of a more consolidated agricultural industry. Now we have a heavily subsidized dairy industry, paid for by taxpayers to produce ever-larger dairies that (among other things) create ever-larger disposal problems like giant manure lagoons. Now you can extract this same dairy More Taxpayer funds collect gas from these lagoons and sell them to oil companies so the companies can comply with taxpayer-funded climate caps. It is difficult to tell who is milking whom.

The only thing that seems certain in this complicated mess is Adam Smith’s century-old warning:

“There is no art which one government sooner learns than to extract money from another People’s Pockets.”


Paul Schwensen is director of the Agrarian Freedom Project and a PhD candidate in 16th-century New Spain at the University of Kansas. Paul earned a master’s degree in government from Harvard University and studied history and science at the United States Air Force Academy.

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