THEGREENGROK

Cap and Trade Part 1: It’s About the Cap, Stupid


by Bill Chameides | June 8th, 2009
posted by Erica Rowell (Editor)

Permalink | 13 comments

The first in a series of posts on cap and trade.

Where the climate is concerned, don’t be fooled: it’s ultimately about the “cap” not the “and trade” part.

The debate about climate policy is heating up. The House is getting ready to consider the Waxman-Markey bill. And many say the rubber hits the road on international negotiations on the climate this winter in Copenhagen.

In This Series
Part 1: It’s About the Cap, Stupid
Part 2: Walking the International Tightrope
Part 3: You Ask, “What?” I Say, “How Wide?”
Part 4: Forests, Farms, and Offsets
Part 5: What’s With the Add-Ons?
Part 6: Emission Allowances

It’s not surprising that much of the debate has focused on cap and trade; after all, that’s what Waxman-Markey would put in place. Now, serious debate is great, but don’t confuse it with obfuscation. I have the sneaking suspicion that some people enter the fray about cap and trade to block any sort of climate legislation rather than to make better climate legislation. They are the obfuscators in debaters’ clothing.

The Wolves Who Cry ‘Cap and Tax’

Some obfuscators wag their finger at cap-and-trade legislation, scolding it as “cap-and-tax” legislation. (For an example, see this Wall Street Journal editorial published just before the Senate voted on the Warner-Lieberman climate bill last spring.) According to this mantra, cap and trade is no more than a not very subtle power grab by bureaucrats — a backdoor ploy for expensive, big-government social programs foisted on the backs of the unsuspecting consumer. (Ironically, some of the same people who have cried “cap and tax” have also sided for a carbon tax. See here and here. What’s that about?)

The Wolves Who Cast Aspersions at Evil Business

And then there are those who cry “cap and profits.” To listen to them, cap and trade is a poorly disguised ploy by big business to reel in $ billions. You know, like it is somehow surprising and wrong that businesses would look for opportunities to make a profit from cap and trade let alone any new government policy.

The Wolves Who Are the Defenders of Business

On the other side of the spectrum, you hear the cry that cap and trade is really “cap and destroy American business.” This scenario sees cap and trade as an anti-American plot to destroy the American economy and shift huge sums of money overseas — like huge sums have not already found their way into foreign banks, in large part because of the absence of any coherent national energy policy.

The Real Deal

Here’s the thing. Ultimately cap and trade is not about taxes, or profits, or undermining profitability, To be effective, any climate legislation first and foremost must be about capping emissions. The data gathered from surface monitoring stations, ships probing the oceans depths, and satellites circling the globe are sobering. To a very high degree of certainty we know that:

  • the globe is warming,
  • glaciers are melting,
  • forests are dying, and
  • the ocean is acidifying.

Less certain but no less worrisome, storms may be becoming more severe and droughts appear to be lasting longer and occurring more frequently.

With a high degree of certainty these trends can be largely attributed to our own emissions of greenhouse gases. And while predicting the future must always be taken with quite a few grains of salt, our best model simulations say that things will get seriously worse unless we … well, ratchet down our greenhouse gas emissions. And the best way to do that is by limiting them with a hard cap.

Experts: Global Warming Is Happening and It’s High Time for Action

You don’t have to take my word for it. Many countries, including our own, use an independent body of experts to resolve complex issues. In the United States, the body is the National Academy of Sciences.

  • In June 2008, the science academies of the G8 + 5 nations stated: “To stabilize the climate,
    emissions should eventually be limited to … less than half of current emissions. Immediate large-scale mitigation action is required.” (Source [pdf])
  • In June 2009, the science academies of 70 countries, including the U.S. National Academy of Sciences, called for “deep and rapid reductions of global CO2 emissions by at least 50 percent [below 1990 levels] by 2050, and much more thereafter” to avoid the dangers of ocean acidification. (Source [pdf])

The only prudent thing to do is to set in motion the policies and institutions that will halt the seemingly inexorable rise in greenhouse gas emissions and then bring those emissions significantly down — by as much as 80 percent by the end of the century.

And so, the most important test of any climate legislation is: will it lead to significant greenhouse gas emission reductions? Everything else, in the humble opinion of this scientist, is secondary.

The How Debate

There are a variety of approaches to rein in greenhouse gas emissions:

  • technological mandates and government regulations (like EPA using the Clean Air Act),
  • government subsidies (like tax credits for renewables), and
  • market-based approaches, such as carbon taxes and cap and trade.

On balance I favor cap and trade because it is the only approach that actually mandates emission reductions over time. For me, the operative part of “cap and trade” is, as I indicated above, cap.

Debate About the Devil, Leave the Wolves Home

Now it’s true that in the case of cap and trade, and perhaps even more so in the case of cap and trade, the devil is in the details. And those details are encompassed in the “and trade” part of cap and trade. Debate on how to do the “and trade” part is appropriate and necessary.

In upcoming posts in this series on cap and trade, I will focus on some of those “and trade” issues, in part to address some of the concerns raised by the wolves. To be sure, the “and trade” issues are complex, difficult nuts to crack. But don’t let the wolves get you to throw the “cap” out with the “and trade” bathwater.

Tomorrow I’ll take a look at the wolves’ cry of “cap and destroy American business” and examine what can be done to protect American businesses if countries like China don’t take their own emissions cap.

filed under: business, carbon dioxide emissions, climate change, faculty, global warming, policy, politics
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13 Comments

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  1. robert sivertsen
    Jun 28, 2009

    has anyone read matt taibbi’s article in the july issue of rolling stone? am i the only idiot that thinks we americans need to get our heads out of our asses?

    • Bill Chameides
      Aug 7, 2009

      Robert, If your head is indeed where you say it is, I agree you should definitely get it out of there. And I am not sure I would recommend Rolling Stone as the best source of information on environmental policy.

  2. CHRIS
    Jun 26, 2009

    THIS BILL IS NOT ABOUT CAPPING EMISSIONS, IT IS ABOUT RAISING TAXES FOR GOVERNMENT PROJECTS. THIS IS NOT ABOUT CLIMATE LEGISLATION AND THE GLOBAL WARMING SCARE TACTIC. ACTUALLY SINCE 2001 THE GLOBAL TEMPERATURES HAVE BEEN COOLING. GLACERS ARE MELTING? NOT EXACTLY. GLACIERS GO THRU CYCLES. YES, RIGHT NOW GLACIERS AT THE NORTH POLE ARE RECEEDING, WHILE GROWING AT THE SOUTH POLE. FORESTS DYING? THERE ARE MORE ACRES WITH FOREST THAN AT ANY TIME IN OUR HISTORY. IF THIS BILL IS PASSED, EVERYONE WILL BE PAYING MORE IN TAXES. ALL OF OUR UTILITY RATES WILL BE HIGHER. WIND AND SOLAR IS NOT THE ANSWER TO OUR ENERGY ISSUE. THE TECHNOLOGY IS NOT AVAILABLE AT THIS TIME TO UTILIZE THEM. ANYONE INTERESTED CAN LOOK AT SPAIN’S GREEN PLAN AND ITS NEGATIVE EFFECTS, OR AT AUSTRALIA WHO IS CONSIDERING DOING AWAY WITH THEIR PLAN.

    • Bill Chameides
      Aug 5, 2009

      Chris, Beg to differ. It’s about capping emissions. Please check your facts on those glaciers by the way. Finally, all this CAPS give me a headache.

      • CHRIS
        Aug 7, 2009

        OK, SO YOU DISAGREE WITH WHAT I SAID. WHAT RESOURCES ARE YOU USING AS A BASIS FOR THE DISAGREEMENT? AS FAR AS THE CAPS GO, GET OVER IT.

  3. JOHN
    Jun 26, 2009

    are all independent sci in agreement w/the fact that global warming is increasing due to man’s gases?

    • Bill Chameides
      Jun 30, 2009

      John, No, the agreement on humanity’s role in global warming is not unanimous — few things are. However, you should consider that fact that the National Academy of Sciences, the independent scientific organization established by Congress when Lincoln was president, urges all nations to take prompt action to avert the dangerous consequences of climate change. Similar positions have been taken by the American Geophysical Union, the Ecological Society of America, and so on.

  4. Peter Griffith
    Jun 10, 2009

    If the operative part of cap and trade is the cap, then it’s a failure from the start. The actual caps being considered are far too high to save the planet; the trades suck blood from citizens and enrich coal companies and Wall Street (or Chicago). I much prefer a straight-forward carbon emissions tax with 100% rebate to taxpayers. This would unleash market dynamics to reduce use of carbon-emitting fuels while stimulating innovation.

    • Bill Chameides
      Jun 10, 2009

      Peter: 1. You’re going to need an awfully stiff carbon tax to outdo a cap that mandates an 80 percent reduction in emissions and is still “too high.” 2. Cap and trade can be revenue-neutral in the same way that a carbon tax can be. 3. Why is a tax better at unleashing market dynamics?

      • Peter Griffith
        Jun 10, 2009

        1) some of the climate response models that are coming out of the Hadley Center and GISS are truly disturbing. I don’t think we really know yet how much CO2 is going to be too much. Jim Hansen thinks we’ve already passed that point. Economic pressures that gradually eliminate GHG-emitting activities will be required. 2) Cap’n Trade can be revenue neutral. But will Congress let that happen? The current bill doesn’t look to be that way. There are so many rent-seekers circling the new revenue that I am not optimistic. 3) A tax can be, in theory, transparent and predictable. Cap’n Trade will not be transparent or predictable. Under a carbon tax, companies can plan for known costs. Under Cap’n Trade, companies lobby for exemptions and special considerations.

        • Bill Chameides
          Jun 11, 2009

          Peter: These are good points and there is lots to recommend with a carbon tax including economic certainty. What it does not provide is environmental certainty — no guarantee that emissions will come down adequately. Given your concert that we may have passed “that point,” I would think you would see that as a priority. And both a tax and a cap and trade can be revenue-neutral — in theory.

      • Ron Turkett
        Jun 28, 2009

        I am a life long environmentalist and we have got a late start in restricting emmisions. However, I don’t understand the comment that an 80% reduction is not enough. The panic that seems to be setting in will not have good results. The millions of green jobs created when we go to renewable energy sources cannot be substantiated. Obviously jobs will be lost. The jury is still out on “humans causing global warming”. It was not that long ago when the crisis seemed to be of the coming ice age. The National Wearther Service ran a program last year that pointed out that the hottest weather in the U.S. was in the late 1800s and early 1900s. I remain open minded and like to base actions on facts and not hype, opinions or Al Gore’s book of misinformation. He may become Global Warming’s first billionaire.

  5. james
    Jun 9, 2009

    I read this blog almost everyday and I like it very much. I have learned a lot from this blog and continue to do so. Thank you!

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