CAP-AND-TRADE OPPONENT

The debate (cap-and-trade vs. carbon tax) is now raging, as in this morning's excellent dialogue between John Kerry and Newt Gingrich. Here is a vigorous spokesman:

Carbon trading won’t work; Experiments with the market scheme favored by Schwartzenegger shows trading favors big polluters without curbing global warming gases
Michael K. Dorsey, April 1, 2007 (LA Times)

WHO
Economists, environmentalists, politicians (Gov. Arnold Schwarzenegger, British Prime Minister Tony Blair) and businesses (U.S. Climate Action Partnership—USCAP—Alcoa, Caterpillar, Duke Energy, DuPont, General Electric, Pacific Gas & Electric, the Natural Resources Defense Council and the Pew Center on Global Climate Change, among others) pushing carbon "carbon cap and trade" strategies

WHAT
A market is formed by a group of states, countries, etc., and permits are issues to polluting industries, establishing permissible carbon dioxide emissions. The governing body establishes a market in which trading takes place. Companies with excess CO2 pollution, rather than suffer hard fines for over-pollution, purchase the right to pollute from those who pollute below their limits.

WHEN
EU market began in 2005. The Western Regional Climate Action Initiative is pending. A Blair-Schwartzenegger alliance, discussed in 2006, is also pending.

WHERE
Kinsey is arguing against a cap-and-trade system proposed by the governors of California, Washington, Oregon, New Mexico and Arizona (the Western Regional Climate Action Initiative). The carbon-trading market has shown mixed results in Europe.

WHY
- Cap-and-trade may be “a Faustian bargain” in that, once carbon emissions are “capped” there are ways for big polluters to trade for “credits” or “permits” from non-polluters to generate greenhouse gases, even if they are purchased “on the cheap” as in “offsets” which do not have nearly the effect on emissions as those they are offsetting.
- Markets are extremely theoretical; one reason advanced for the “collapse’ of the EU market was overestimation of “caps” and resultant undervaluing of emissions. The pollution credits given to petroleum, natural gas and electricity generating companies by their respective EU governments were booked as assets. When valued at market prices, profiteering in the collapsed EU market made the biggest polluters the winners and consumers the losers.

QUOTES
- Kinsey: “Researchers at Open Europe, an economics think tank in Britain, recently issued a report on the experiment. They concluded that the EU Greenhouse Gas Emissions Trading Scheme represents "botched central planning rather than a real market." As a result, the report said, carbon trading has not resulted in an overall decline of the EU's carbon dioxide emissions.”
- Kinsey: “The EU experience doesn't augur well for the effectiveness of a global carbon-cap-and-trade scheme in a world characterized by growing economic inequality and enormous differences in governmental capacity to provide oversight, let alone regulation. The risk is that by the time it's apparent such a scheme is not working, extreme climate change will already be wreaking havoc.”