Thursday, July 09, 2009

Why are we doing this again?

I keep hearing we gotta have cap and trade. So what would you call this?

Cap-and-trade regimes have advantages, notably the ability to set a limit on emissions and to integrate with other countries. But they are complex and vulnerable to lobbying and special pleading, and they do not guarantee success.

The experience of the European Union is Exhibit A. Emissions targets were set too high. Too many pollution allowances were given away to industry. The value of a carbon credit plummeted. Companies made windfall profits by charging customers more for energy while selling allowances they didn't need. And the Europeans have not had much success reducing greenhouse gas emissions. Disputes on the next round of reductions led to the creation of a two-tiered system to appease Eastern European countries fearful of the cost to their industries.
It's quite simple, actually. The advantage of cap and trade is that it disguises the reality that the government controlling the regime is imposing an especially onerous and regressive tax. And the market for these credits will necessarily be as arbitrary as the market for credit default swaps was. And I think we all remember how that movie ended.

And there's this little problem, too:

Washington, D.C.-During a hearing today in the Senate Environment and Public Works Committee, EPA Administrator Jackson confirmed an EPA analysis showing that unilateral U.S. action to reduce greenhouse gas emissions would have no effect on climate. Moreover, when presented with an EPA chart depicting that outcome, Energy Secretary Steven Chu said he disagreed with EPA's analysis.

"I believe the central parts of the [EPA] chart are that U.S. action alone will not impact world CO2 levels," Administrator Jackson said.
What would be needed? The agreement of China and India. Likely? Well, not so much.

Maybe there's a good reason to set up an artificial market for intangible credits that are well-nigh impossible to price, with the goal of doing something that won't work. Guess I'm not seeing it. Help me out, people -- explain the benefit, if you can.

(H/T: Heritage)


W.B. Picklesworth said...

The benefit is entirely political, but in two distinct ways.

First, for the liberal political class it gathers more power to the federal government. I have no doubt that at least some of the politicians honestly believe that this is a good thing, that the government can then solve certain problems. Now those problems might not be carbon emissions, but hey, whatever. Or, one of the problems might be carbon emissions, but to "solve" the problem they would have to do something other than this bill provides for. Such people have a fairly dim view of the market (and of people left to their own devices).

Second, this bill appeals to folks who are under the impression that there is an environmental crisis. These people want this type of legislation because they sincerely want to do the right thing and are willing to sacrifice for it. Unfortunately, they are so caught up in the so called crisis that they are unwilling to look at these matters dispassionately, considering the arguments of people who disagree with them. "We've got to do something to save the Earth!" is a typical statement.

So why should we push through this legislation? Well, either to satisfy some people's urge for power or other people's need to express their passionate responsibility by the means most obvious to them, the government. Other than that there is no good reason.

my name is Amanda said...

I wish I lived in a world where I could confront the realities of global deforestation and the disintegrating ozone layer by simply saying "These don't exist!"

I'm not going to argue about what is a tax and what is not (lest I be accused once again of being "occasionally intelligent"). I do NOT like the programs that pass high costs on to the consumer. But on the other side of that - just a question here - What's so horrible about a program that would urge companies and citizens to be more responsible with energy use? Can we admit there is a semblance of merit in this idea? Or does the method negate possible advantages?

That the program is purported to have failed in Europe doesn't mean it would fail in the US.

Mark Heuring said...


That's about how I see it. And Amanda arrives on the scene to confirm your analysis.


A few points:

If you look at aerial photography of nearly any place in the United States from 1930 and compare it to today, you'll see that the notion of global deforestation is silly. My little quarter acre of heaven had no trees in 1967. It now has six fully mature trees on the property. The great northern forests that were clear-cut 100 years ago are all back. Deforestation in South America was a problem 25 years ago, but not so much any more.

You ask the following:

What's so horrible about a program that would urge companies and citizens to be more responsible with energy use? Can we admit there is a semblance of merit in this idea? Or does the method negate possible advantages?

If urging were all that were involved, no one would complain. The issue is that the program will compel behavior. And the benefit is hard to see.

You also argue:

That the program is purported to have failed in Europe doesn't mean it would fail in the US.

Let's be realistic. It should have been much easier for limits on carbon emissions to work in Europe, where you have large populations on a much smaller footprint and a highly developed system of public transportation. It's also a place where the price of gasoline is up to 4 times the price it is in the United States. Europe also gets a significantly greater portion of their power generation from nuclear plants, especially France.

If they can't make it work in Europe, how do you suppose such a program would work in a country like the United States, where the population is spread over a vastly larger land mass, where public transportation infrastructure is largely absent and would be prohibitively expensive to provide, and where it is well-nigh impossible to site and build a nuclear power plant? I can tell you that windmills and solar panels won't get it done.

W.B. Picklesworth said...


I think it's hard to be particularly nuanced in these types of forums. For the record, there are environmental challenges/dangers that are worth thinking about. For instance, I don't think we should be flippant about pollution or energy waste. I think the problem, for those of us arguing from the right, is that proposed solutions always seem to involve increasing government power at the expense of individuals. In fact, there is a way of speaking about this whereby a person who does not support government intervention is accused of being unserious or even malevolent towards the Earth. This is dishonest rhetoric.

Why? Because a great many of us who oppose government intervention do so not because of a lack of concern, but out of conviction that these problems are not necessarily fixed by regulation
and might even be exacerbated by them. The law of unintended consequences is always at work, but seldom given its due.

An example of this is DDT. Following Rachel Carson's book A Silent Spring this chemical was banned in the US and much of the West. Further, its use was so heavily frowned upon that countries in Africa, for example, were bullied into not using it. In the years following the ban, millions have died from Malarai, a disease that can largely be prevented by using DDT.

So why was it banned anyway? Because in heavy doses it thins bird eggs. However, instead of making reasonable adjustments to mitigate such problems while retaining its life-saving capabilities, DDT was vilified. It was used as a rhetorical club.

So, if folks truly want what is best for the environment and for the people of this country, we have to put down these rhetorical clubs, set aside these false accusations and actually talk about what the dangers and challenges are and what might be done about them. I think that we'd find that there are solutions to be found outside the halls of government, many of which are already at work due to private citizens working hard on something that matters to them.

my name is Amanda said...

Mark, I would have to look at some aerial photographs and get back to you. ;)

WBP - That was a very concise and fair argument. I (had to) read Silent Spring in college, and I found it incredibly boring (after the poetic first chapter describe nature in silence) - but convincing. I can't say a blog comment would change my mind about what I've learned about the state of the environment (whenever I hesitate, I think about the continual melting of the polar ice caps), but it's a relief to read a POV with issues listed that can actually be researched. (As opposed to, as you say, just rhetoric.)

Mark Heuring said...

Mark, I would have to look at some aerial photographs and get back to you. ;)

You should do it, Amanda. All the cool kidz are looking at aerial photography these days...

Gino said...

i think the smart folks are out there trying to find ways to make money trading the carbon credits...
maybe i'll look into getting a broker's license.

or maybe i'll just print up some credits of my own, and sell them.

Mark Heuring said...

or maybe i'll just print up some credits of my own, and sell them.

Good plan, Gino! Bet your homemade credits will be at least as good as the ones the government issues. And a good Catholic like yourself should know all about selling indulgences, right?

Anonymous said...

It's not saving the earth that is the problem, it is the political shills who use saving the earth as their shield to hide their real motivation which is the attempt to grab more political power and increase the size of federal government so they have more money to engage in social engineering. Mao did a good job of this, but the last time I checked, he lived in a pretty nice house. In the end, the people in power live like aristocracy, while the public suffers. If you think that this is a fallacy, find some aerial photography of Al Gore's house, and examine his carbon footprint.

Putting the merits of "saving the world" aside, what happens if the United States engages in draconian measures to reduce emissions, only to have major portions of the rest of the world refuses to sign any agreements, or worse yet (and in reality what will happen) signs the agreements and then ignores them? The United States, which is already struggling to compete in the world is now less competitive, it's people are shackled with higher restrictions and taxes (a lower quality standard of living), and the world is still getting ravaged.

While the ideal of "Saving the earth" is most definintely an admirable goal, engaging in ineffective feel good legistlation that makes things worse not only is a bad idea, in this economy it could be exactly the prescription that would lead to a global depression.

Gino said...

mark:you get more anon comments than any other blogger i know.

Mark Heuring said...

I can only assume that everyone is afraid of me, Gino. You know how fearsome I can be.