I was skimming articles on
Real Clear Politics and saw a couple
talking about the monster issue conservative talk radio was sounding the alarms
about during the 2008 election: Cap And Trade.
What is “Cap and Trade,” exactly? Well, at it’s most basic level, it’s a tax on companies that produce carbon dioxide emissions. At a closer level, it is a system by which companies, industries, and even states and countries purchase and carbon credits on an open market. But, in the end, it’s a tax, because when everything is said and done, the revenue generated by cap and trade transactions goes to… well, nobody really talks about where it goes, but it goes to some government account.
There’s an obvious similarity between cap and trade and the SCHIP legislation recently signed by President Obama: the government maneuvers itself into a situation where it is actually encouraging the bad behavior it was supposedly trying to discourage.
In the case of SCHIP, the legislation signed calls for a large tax increase on cigarette and other tobacco product purchases. The rationale here is that the increased fee will create a burden on those in society that purchase these unhealthy products and, therefore, will encourage them to stop engaging in behavior like smoking. The money collected from these taxes is funnelled into programs to guarantee health insurance for children.
If you haven’t figured it out already, while legislators called this tax increase a penalty on smokers that should decrease the number of smokers, they actually want more smokers in order to fund SCHIP!
It’s will be just the same with cap and trade legislation. Replace a person smoking cigarettes with a company that produces carbon dioxide emissions as part of their operations and you’ve got the same thing. The money collected from this scheme will be funnelled to some program or group of programs that are then dependent upon companies doing something government really does not want them to do.
The conflict of interest here is interesting, but to muddy the waters more, it seems apparent, to me anyway, that the urgency of addressing carbon dioxide emissions is still far from settled.
In one article I read, 10 Ways To Trade Up by Kevin Drum with Mother Jones, Drum compares cap and trade ideas to the 1970 Clean Air Act and uses it as a proof of cap and trade’s inevitable success.
We found out in 1990, when the Clean Air Act was modified to address acid rain pollution caused by sulfur dioxide from coal-fired power plants. Instead of requiring every plant to install a specific cleanup technology or meet a specific emission rate, the epa simply set a nationwide cap on the total volume of SO2 emissions and required power plants to own a permit for each ton of SO2 they emitted. Each plant was allocated a certain number of permits, and if a plant reduced its emissions to the point where it didn’t need all its permits, it could sell them to the highest bidder.
The problem I have with this comparison is the “well, duh!” assumption that there’s nothing wrong with comparing carbon dioxide to sulfur dioxide. They’re both bad for the environment, one might say.
The problem is that sulfur dioxide is a poisonous gas that can be used to produce sulfuric acid in the atmosphere. Sulfur dioxide has been well documented to cause a wide variety of health issues in humans and animals. Carbon dioxide, not so much. In fact, carbon dioxide has been shown, time and time again, to improve the production of plant life and has little or no effect on humans.
It should also be mentioned here that carbon dioxide accounts for anywhere from one tenth of a percent to one percent of all the greenhouse gases in the atmosphere (the evil, nasty water vapor being the largest constituent of these insidious chemicals bent on destroying life on earth.)
The global warming alarmists claim rising carbon dioxide levels in the Earth’s atmosphere are to blame for seemingly corresponding rising global temperatures. This is intriguing until you match up temperature fluctuations on Earth with temperatures on other planets in our solar system and match that to solar energy output from our sun.
As silly as it may seem to create an ellaborate trading market (to veil a taxation scheme) to plunder companies for generating a mostly harmless gas into the atmosphere, it’s very likely it will happen. President Obama has been consistent in statements about environmental policy and the “rightful place” of science.
Drum writes, “The backbone of (President Obama’s) climate policy is actually an ambitious program (Cap and Trade) that, if done right, will reduce greenhouse gases and raise desperately needed revenue—and, most important of all, has a fighting chance of making it through the congressional sausage factory in one piece.”
The country and the world seem to be slowly waking up, however. Most of the online comments to the Mother Jones article seem to be indicative of this as most of them decry global warming alarmism and question the logistics of cap and trade legislation.
There are a number of problems with your reasoning here, and it really undermines your argument. There's also a point I'd like to make about markets, negative externalities, and how to deal with them.
First of all, you're insinuating that cap and trade legislation will not work because, in creating a negative incentive towards carbon dioxide emission, it creates a revenue source in the government that will be an incentive for the government to encourage carbon dioxide emissions. This is silly, and you provided your own counterexample in the form of the successful sulfur dioxide cap and trade system.
Second is your argument that, because carbon dioxide in normal levels is harmless or even beneficial, it should be allowed to be emitted without limit. Consider the case of the human body's relation to water. A normal amount of water is absolutely essential to health, but an extreme amount can be deadly. Such it is with most things in nature, and although there is not 100% agreement among scientists, there is a strong argument that our extreme output of carbon dioxide is causing harm.
Finally, even if carbon dioxide wasn't causing harm directly, it is a byproduct of burning carbon-based fuel, i.e. oil. Oil is a limited resource, and we are naturally inclined to use more and more of it, which will only make it run out faster. The easiest way to reduce CO2 emissions is to use less oil and less energy, which we want to encourage for reasons unrelated to the environment.
And this brings us to the behavior of markets in the face of negative externalities, or the tragedy of the commons. It is my strong belief that it is a proper role of government to regulate businesses such that negative externalities become reflected in market transactions when they would not otherwise be. If that does not happen, our environment, the natural resources in which we depend on for our survival, will fail us and we will cease to be an industrialized nation. This has been the fate of many great historical societies that did not understand the resource capacity of their environment or how to deal with it.
I don't think the government applied a cap and trade system to sulfur dioxide. They just set limits on output and granted permits based on individual company applications (no possibility for bribery or anything bad there!)
That's how it should be. If something is Bad(tm) (i.e. smoking, emitting carbon dioxide, whatever), restrict it, make it illegal, whatever, but creating a business or market based around the license to engage in Bad(tm) activity... that's just an open invitation for all kinds of problems and conflict of interest. I've already talked about the problems of taxing to fund something else.
I was a little fuzzy on how cap & trade systems work, but I felt that you were misrepresenting how they worked, so I did a little bit of research.
Yes, the Acid Rain program of the Clean Air Act of 1990 was essentially a cap & trade emissions control program. The idea behind cap & trade is that a survey of historical emissions is taken across industry and a cap is set based on those. The cap is expected to gradually lower over time to meet emission goals. The 'trade' portion comes in when businesses which are able to quickly and efficiently reduce their emissions can sell the right to pollute the amount they are under their cap to someone else who is not as able to reduce emissions.
So, this is not a tax, and no revenue is made by the government unless there are fines to collect for non-compliance. If you want to emit more, you end up paying another business who has invested money in polluting less. Thus, the cost of lowering emissions is spent directly on emissions reduction, or at least far more directly than it would be via an emissions tax. The government is only involved in enforcement and oversight of the market.
I am surprised you are against this, because of all the solutions to pollution issues, free market supporters are most often for this instead of other options like taxes and hard caps. Most opposition to cap and trade systems comes from environmentalists who feel it is not effective enough. I guess I must add to that extreme right-wingers who oppose all government interference in the market, but they are being incredibly short-sighted in this case.
I'm curious how you feel about negative externalities such as pollution, natural resource limits, etc. and how (or if) the government should deal with them. And if you believe the government should not, how would businesses and individuals be incentivised to avoid environmental disaster or resource exhaustion?
Even if you don't believe in anthropogenic global warming, we clearly need to reduce our dependance on fossil fuels, which will inevitably run out some day. If cap and trade is not the answer, what is? (drilling is not an answer to this question, whether or not it is advisable; it merely postpones the inevitable.)
Well. Me being my age i dunno much to say to this. I'm merly researching a little project type thing from my grandma. she wants my opinion and what not.
I dunno what to say. I believe reducing our dependency on Fossil Fuels is greatly needed. I do not believe Global warming is caused by us. THe Earth's temperature has fluxuated For billions of years. Yes i believe a cap should be put on CO2 Emissions. Therefore reducing Fossil fuel usage. Or maybe a cap on Fossil Fuel usage itself. Therfore Skipping over CO2 emissions and going right to the problem. The world is addicted to Fossil fuels ( The world being The people). We shall run out sooner or later and without an alternative war will break out over whats left ( though war is already being fought over who controls it).
So what is a good solution? Putting money into research on say.. A new type of fuel? or a New Engine. People are smart. The trick is using what we have. ( Most people don't). If you don't use your mind you lose it. I believe this. So i believe the solution is slowly decreasing need for Fossil fuels and Increasing the need for Something better. Maybe instead of new we make something we already have better. Electric cars, water cars, etc.
How about a salt water car? We don't drink that water. There is plenty of it.
I don't have the answers. Only an opinion and ideas. I'm only 15 so i have alot to learn.
Your comments are good and valid comments. The problem, really, is too much government interference or how the government affects the markets. It's commonplace to hear that we are fast running out of fossil fuels, but is it true? I've read lots of stories that suggest there is a LOT more fuel available than we've ever known about before, even here in the United States. But while other countries are searching for and obtaining new sources of fuel, we're just sitting on our pockets and saying we're going to develop "better" energy sources? It's too early, in my opinion, to be abandoning fossil fuels. Our society and markets just depend too much on them.
What Cap & Trade legislation does (and we can see it already because some countries in Europe have already implemented and have had it for a few years) is it drastically increases costs. Companies like oil companies and electric companies pass those costs along to the consumer so really it's a penalty to people, not companies.
What could the government do instead? They could provide incentives to companies that develop cleaner forms of energy or vehicles that are cleaner. Cap & Trade doesn't provide incentive. It just encourages us to make more money so we can afford our lifestyle. A lot of people won't be able to afford it and it will result in more unemployment and poverty.
If the government really cared about cleaner forms of energy generation, why won't they allow more hydroelectric dams? That's about the cleanest, cheapest form of power generation there is. What about nuclear power? That's the second cleanest form of power generation. We can't have that either. Neither one produces CO2 (which plants and ocean algae love, by the way).
There just isn't much common sense in politics these days. It's all about scratching other people's backs and having them scratch yours instead of doing what's best and what's right.