Subsidizing Wall Street to Buy Chinese Solar Panels

http://online.wsj.com/article/SB10001424052970204903804577082631863392956.html
...
Consider the current 30% federal solar energy subsidy. A home solar system with 60 solar panels produces about 15,000 watts of power, enough to completely offset the $6,000 annual electricity bill of a typical upscale California home. The system costs about $90,000 prior to the 30% federal income-tax credit, which reduces its cost to $63,000. After a simple payback period of about 10 years, the homeowner literally enjoys free electricity for the remainder of the guaranteed 20-year system life, a very profitable 10 years.

But what if that $27,000 tax credit, the accelerated-depreciation tax savings, and most of the hefty post-payback profits went to Wall Street firms with a "tax appetite," not the homeowner? That's just what happens with the majority of new home solar-system installations today.

... Today's most successful pitch for home solar financing goes like this: "Why pay a lot of money when you can get your solar system installed free and immediately reduce your utility bill?" Most homeowners find that proposition compelling. They ignore the fine print: "You must give your tax credit and depreciation to us and sign a long-term contract to buy power from us at prices just below market."

Today, most new home solar systems are purchased by special Limited Liability Corporations (LLCs) that are specifically created by Wall Street firms to purchase home solar systems and to sell power to the homeowner on a cell-phone-like contract. The homeowner does not mind giving up the tax benefits as long as the "free" system reduces utility bills.

However, when the system is paid off and the monthly LLC profit jumps to 100% of the electricity bill, the LLC solar electricity price to the homeowner is maintained just below market—and the profit really begins to roll into the LLC. Since the risks to the LLC grow as the solar systems age, many banks offload their risk by selling the LLCs before their 20-year lifetime is up, locking in much of the long-term profit. There is now a growing market for what might be called "solar-backed securities." Wall Street understands the time-value of money; the federal government and consumers do not.

One of the largest solar-system installers in the U.S., SolarCity Corp., uses the LLC strategy and currently buys a majority of its solar panels from the low-cost Chinese supplier, Yingli. Thus when President Obama said that we must subsidize our solar industry to remain competitive with the Chinese, it would have been more accurate to say that we subsidize Wall Street to create employee-less corporations that buy and install Chinese solar panels in the U.S. Wall Street and consumers understand that free markets are borderless; Washington does not.

Just last week, the U.S. International Trade Commission found the Chinese solar industry guilty of "dumping" solar panels in the U.S. Tariffs are likely to be levied against Yingli and others....

by T.J. Rodgers, Founder, President and CEO of Cypress Semiconductor
The Wall Street Journal www.WSJ.com
December 8, 2011
FOR FULL STORY GO TO:
http://online.wsj.com/article/SB10001424052970204903804577082631863392956.html

Airlines and Carbon

http://www.nytimes.com/2011/08/03/opinion/airlines-and-greenhouse-gas-emissions.html
The world’s leaders should have reached a deal long ago to limit greenhouse gas emissions. In the absence of such a deal, the European Union’s plan to regulate the carbon emissions of all airplanes that land or take off from European airports is a reasonable attempt to address an urgent problem.

Aviation amounts to about 2 percent of global carbon dioxide emissions, a share projected to rise quickly as air traffic surges. The European Union wants to cut these emissions by 3 percent next year compared with a 2004-2006 base line, using a cap-and-trade scheme that would force airlines to buy permits to cover emissions that exceed their target.

Starting next year, any airline flying in or out of a European airport would need permits for emissions for the entire flight. The International Air Transport Association estimates that the average fare on flights in and out of Europe would rise by $21 to $45, or 2.2 percent to 4.6 percent.

The plan faces enormous opposition: China has threatened a trade war. India has protested. And the Air Transport Association of America, the airline lobby, has blasted the scheme as a costly and illegal invasion of sovereignty.... The group has filed a lawsuit to stop the rules before the European Court of Justice.

The Obama administration has objected, and a bill barring American airlines from participating in the scheme has bipartisan support in the House. ...

These arguments are not very strong. Airlines will be given a ceiling and allocated permits; they will have to buy additional permits only if they exceed the cap. Those that boost efficiency could have a surplus of permits to sell.

American airlines are already making progress. The Transportation Department says American airlines have emitted 15 percent fewer emissions from 2000 through 2009 while carrying about 15 percent more passengers and cargo....

A global deal would be great. But international talks to regulate airlines’ emissions have been going on fruitlessly for almost 15 years. The European Union’s plan is a much needed first step to controlling a growing source of dangerous emissions....

New York Times Editorial www.NYTimes.com
FOR FULL EDITORIAL GO TO:
http://www.nytimes.com/2011/08/03/opinion/airlines-and-greenhouse-gas-emissions.html

August 2, 2011

Manhattan Institute: Fracking Ban Costs New York Billions in Lost Economic Output and Tax Revenue

http://www.manhattan-institute.org/pdf/press_release_eper09.pdf

The natural gas boom that America is experiencing is due largely to advances in hydraulic fracturing and horizontal drilling techniques which free gas trapped in densely packed shale formations previously thought to be uneconomic. However, in many states, these techniques have become a major focus of environmental concern. This concern has led to a ban on the use of hydraulic fracturing in New York State—but is this moratorium on shale gas drilling beneficial for New Yorkers?

A new Manhattan Institute Center for Energy Policy and the Environment report, authored by University of Wyoming professor Timothy Considine, analyzes the economic and environmental impacts of shale gas drilling in the Marcellus Shale formation in Pennsylvania (the formation spans several states including, New York).

The report, “The Economic Opportunities of Shale Energy Development”, which was released at an event in New York City on Wednesday, June 7, 2011, finds that the net economic benefits of shale drilling in the Marcellus are considerably positive while the environmental impact of the typical Marcellus well is relatively low. Pennsylvania’s experience suggests that New York, through its ban, is needlessly stifling job growth, investment, and tax revenue in a part of the state that can scarcely afford it.
 

What ending the moratorium means for New York:

• $11.4 billion in economic output and $1.4 billion in tax revenues.
• $4 million in economic benefits from each well but only $14,000 in economic damages from environmental impacts.
• Some 15,000 to 18,000 jobs could be created in the Southern Tier and Western New York, regions which lost a combined 48,000 payroll jobs between 2000 and 2010.
• 75,000 to 90,000 jobs could be created if the area of exploration and drilling were expanded to include the Utica Shale and southeastern New York, including the New York City watershed.

Considine carefully reviewed the public records of environmental violations reported by the Pennsylvania Department of Environmental Protection for the period 2008–10 and found that the probability of an environmental event is small and that those that do occur are minor and localized in their effects.

The Report notes:

• The typical Marcellus shale gas well generates about $4 million in economic benefits.
• The economic damage resulting from the environmental impacts of a typical shale gas well comes to $14,000.

The expected environmental costs are so low because the probability of an environmental event is small, and those that do occur are minor and localized in their effects.

Those environmental problems that have arisen in connection with hydraulic fracturing in no way call into question the soundness of that procedure. In reality, they result from improper drilling and well-casing technique and defective formulation of cement. Such errors and flaws allow wells to penetrate shallow gas deposits, permitting the gas within them to escape and enter groundwater supplies. Marcellus gas resides far below these deposits and any aquifers. More stringent design standards should be adopted, and more active regulatory oversight should be exercised. These steps would reduce the incidence of such problems.

Considine’s report concludes that the potential economic benefits of shale gas exploration greatly exceed the potential environmental impacts in New York State. Developing the Marcellus Shale could drive commercial activity in the Empire State for decades, leading to long-term increases in personal income and tax revenue

The full report is available at http://www.manhattan-institute.org/html/eper_09.htm
 
By Timothy J. Considine 1, Robert W. Watson 2 and Nicholas B. Considine 3
1. University of Wyoming,
2. The Pennsylvania State University
3. Natural Resources Economics
The Manhattan Institute www.manhattan-institute.org
Press Release dated June 7, 2011

A paper subsidy that must be stopped - The Washington Post

http://tiny.cc/w7uxo
It would be hard to imagine a purer case of corporate welfare than the tax credit that paper manufacturers reaped in 2009 for powering their plants with a liquid industrial byproduct known as “black liquor.” There was no need for any subsidy: Paper mills had been recycling the substance for decades. But in 2007, Congress enacted a 50-cents-per-gallon “alternative fuel mixture” tax credit to encourage new industrial liquid fuels from biomass. And the paper mills saw a chance for easy money: They asked the Internal Revenue Service if black liquor, mixed with diesel, qualified; the IRS said yes. Result: Since the credit was “refundable,” paper companies reaped billions of dollars from the federal government in 2009. International Paper alone received about $2.1 billion. Congress closed the loophole effective Dec. 31, 2009, using the projected savings to pay for health-care reform.

Now it turns out that paper companies are still exploiting the tax code to make money from black liquor. The convoluted story begins on June 28, 2010, when IRS lawyers issued an opinion permitting paper manufacturers to retroactively claim a different benefit for the black liquor they burned in 2009: the cellulosic biofuels credit. To be sure, companies choosing to switch to the cellulosic credit would have to give back the money they got from the alternative fuel mixture credit (with interest). But for some companies, that may be profitable, since the cellulosic credit is $1.01 per gallon — twice as much as the alternative fuel mixture credit. Furthermore, companies can “carry forward” the 2009 cellulosic credit to offset future tax bills well into this decade.
...
The Washington Post www.WashingtonPost.com
Editorial, May 3, 2011