Sunday, March 04, 2007

Carbon Cap and Charade Carbon Cap and Charade

WSJ: Cap and Charade: The political and business self-interest behind carbon limits points out that the cap-and-trade makes no sense until you have government imposed caps. There is nothing of value to trade until the government creates an artificial monopoly here in terms of caps on pollution. And, thus, you see why a lot of companies are jumping on the bandwagon.
The difficulties don't lie with the trading, but with the cap, which is where the companies lobbying for restrictions come in. James Rogers, CEO of Duke Energy, put it plainly earlier this year: "If you're not at the table when these negotiations are going on, you're going to be on the menu." Translation: If a cap is coming, better to design it in a way that you profit from it, instead of being killed by it.

Which is why the emphasis really should be cap-and-trade. It's all about the cap, because without it there's no trading. We don't buy our daily ration of oxygen because it's in abundant supply. Same with carbon dioxide--there's no constraint on your ability to produce CO2 until the government creates one...

By far the biggest question, however, is where the cap is set. The trading of emissions credits does nothing to lower the quantity of emissions--it merely shifts around the right to emit. It's the cap that sets the amount of CO2 put into the air. And as Europe has learned, that figure is a political football unto itself. When the EU started emissions trading in 2005, the price of a ton of CO2 quickly tripled before cratering when participants realized that the cap hadn't been set low enough to create a genuine shortage.
Some of the comments are good to, including this one from David Skocik - Dover, Del. titled: No Clothes, Great Footprints:
Not satisfied with inventing the Internet, Al Gore has come up with something even better. Not only has he perfected carbon footprints, he's figured out a way to sell them and won an academic award for doing so.

This is trading in potential futures that will produce nothing except billions in cash to environmental hucksters. Worse, when government bureaucrats--especially at the federal level--put themselves in charge of creating standards, the emphasis immediately shifts from the common good to revenue creation...

But as Economics 101 teaches, nothing is done without cost. And every time the government adds to the bottom line of producing anything, whether widgets, cars or energy, it will always be passed along to Joe and Sally Six Pack...

As for Al Gore, the emperor may have no clothes but he's got great footprints.

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