The earth is not flat

In this age of global warming, many have directed our attention to the use of cap and trade tools to reduce carbon emissions. According to the U.S. Environmental Protection Agency:

Cap and Trade is a market-based policy tool for protecting human health and the environment. A cap and trade program first sets an aggressive cap, or maximum limit, on emissions. Sources covered by the program then receive authorizations to emit in the form of emissions allowances, with the total amount of allowances limited by the cap. Each source can design its own compliance strategy to meet the overall reduction requirement, including sale or purchase of allowances, installation of pollution controls, implementation of efficiency measures, among other options. Individual control requirements are not specified under a cap and trade program, but each emissions source must surrender allowances equal to its actual emissions in order to comply. Sources must also completely and accurately measure and report all emissions in a timely manner to guarantee that the overall cap is achieved.

Denis Hayes, one of the world’s foremost environmentalists, would seem to be an unequivocal supporter of cap and trade schemes to reduce global warming. Many others from across the political spectrum support them. Yet, in a thoughtful, provocative, and visionary article he effectively challenges our belief in the cap and trade system. He is reminiscent of those who said the earth is neither the center of the universe nor flat. He insightfully argues:

The backbone of any comprehensive policy to limit greenhouse gas emissions must cap carbon at the places — coal mines, oil fields, pipelines, ports — where it enters the economy. Instead, at the behest of corporate behemoths and their green enablers, our political leaders are focusing most of their attention on smokestacks, and when that is obviously impossible (e.g. with gasoline or propane) on refiners or distributors. They want to cap CO2 where it enters the atmosphere — an approach that is guaranteed to fail because there are far too many point sources.

Regarding Europe’s cap and trade schemes he states, “Europe has already attempted a cap-and-trade program, and it belly-flopped.” According to Denis, their failure taught us:

  • The most important part of cap-and-trade is the “cap.” Any successful law must place an impermeable lid on the amount of carbon that enters the atmosphere. To whatever extent additional trees or windmills are used to “offset” additional carbon-based fuels, the exercise is self-defeating.
  • In contrast to regulating a sea of smokestacks, the best course is to require carbon permits at the 2,000 sources where carbon enters the economy. It would be simple, straightforward, and impossible to “game.” It is vastly more effective than trying to police carbon dioxide wherever carbon is burned. In setting the number of carbon permits issued — and thus determining how much coal, oil, and gas can enter the economy — the government would be setting an absolute, easily-enforced cap on emissions.
  • All carbon permits should be auctioned — not given away. In Europe, permits were given away to large carbon users to ease their transition to the new regime. Major polluters made cheap improvements, lowered their emissions, and sold their unneeded permits. This gave windfalls to the worst polluters, penalized companies that had already invested in efficient new factories and renewable energy, and helped guarantee that Europe would miss its Kyoto targets.
  • Auctioning 100 percent of all carbon permits is fair and transparent; it eliminates backroom special-interest pleadings. By reducing the number of permits auctioned each year, the government can guarantee that its emissions targets are met.

Recently, we’ve witnessed historic volatility on Wall Street and world markets as worries of a worldwide recession begin to overtake us. Yet, there remains one bullish market. In a Washington Post article entitled, There’s a Gold Mine In Environmental Guilt, it reported, This is strange territory. The Dow is down. Wall Street needs a bailout. But in the Washington area and across the country, there is still a bull market in environmental guilt. But, are we likely to witness an historic collapse of the market that was established to save the planet?

The New York Times in a counterpoint response to the Post article, A Bull Market on Offsets, but What Are They Really Worth? states, “Writing last year at the online journal Nature Reports Climate Change, a Web site of Nature Publishing Group, an assembly of five scientists and climate experts called the fuzzy notion of additionality the ‘most vexing’ challenge facing the offsets trade — particularly in voluntary markets like those in the United States.”

The blog’s closing paragraph states:

Developing market-wide standards for drawing lines, as well as creating mechanisms for government oversight, the authors of The Nature article say, is a first step. As it is, a wide array of competing industry standards are being developed, the experts lament, which might well undermine the whole enterprise: “Although the consequences are difficult to predict,” the authors write, “the confusion produced by a host of independent ’standards’ operating in a regulatory vacuum has the potential to discredit market-based environmental policies.

The European Community, the United States, and those nations that have committed to reduce human impacts on the climate must heed the words of Denis Hayes and the authors of Nature Reports Climate Change. If we ignore them, we will fail to save the planet.

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2 responses to “The earth is not flat

  1. David Treadwell

    Cap and trade, or its close (and economically superior) cousin the carbon tax, are indeed the right way to put market pressure into the system to reduce CO2 emissions.

    The challenge is that pollution is currently free. Nobody pays to pollute, at least not CO2 pollution.

    So, putting in place carbon limits or taxes will be politically difficult because it will increase prices as the “free pollution subsidy” is removed.

    This is another case where political will is essential. The popular resistance to increasing taxes is huge. Would the populace really accept the higher gas prices that would inevitably result from cap and trade or a carbon tax? I doubt it.

  2. “The popular resistance to increasing taxes is huge. Would the populace really accept the higher gas prices that would inevitably result from cap and trade or a carbon tax? I doubt it.”

    Not just gas prices, just about every food item, and retail good, durable or non-durable, would increase in price… since all business costs would go up due to shipping and manufacturing costs.

    Another risk is a punitive cap-and-trade/ carbon tax could lead to a shift in production to overseas.

    We can all be hopeful that energy efficiency and long-term wise choices will be advantageous and effective enough to attract widespread implementation.

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