Friday, May 2, 2008

I'm gonna cap your carbon

I don't write much about environmental issues, global warming and the like, because I'm no expert and offer no special knowledge. I believe that global warning is real, and the debate (largely muted by now) as to whether it's natural or man-made is unhelpful, even specious. Even if it were true that the increase in temperature is largely an outgrowth of natural forces, we've built our society around the conditions we have; New York City developed with sea level at a certain point, and, if that changes, the city will be in trouble.

So if we can do something to mitigate the effects of global warming, we should, but the solutions will have to fit into a context of political and economic reality (Fareed Zakaria, on Charlie Rose last night, said that the U.S. will have to built green energy plants in China and India to replace coal; to his credit, he acknowledged that it would be a tough sell politically - I think he underestimated that).

The answers seem to be coalescing around a consensus, that the nation must invest in research for clean energy, that we need to increase the fuel economy standards, that we must talk up the benefits to adopting everyday measures to cut harmful emissions, and, most particularly, that we should institute a cap-and-trade program for carbon emissions. While this is probably a good idea, there is one grating central idea that underlies all these discussions (there was a pretty good summary of the current cap-and-trade situation in TIME magazine written by Eric Pooley).

I could summarize cap-and-trade, but I'll let Wikipedia do the job this time:
A central authority (usually a government or international body) sets a limit or cap on the amount of a pollutant that can be emitted. Companies or other groups are issued emission permits and are required to hold an equivalent number of allowances (or credits) which represent the right to emit a specific amount. The total amount of allowances and credits cannot exceed the cap, limiting total emissions to that level. Companies that need to increase their emissions must buy credits from those who pollute less. The transfer of allowances is referred to as a trade. In effect, the buyer is paying a charge for polluting, while the seller is being rewarded for having reduced emissions by more than was needed. Thus, in theory, those that can easily reduce emissions most cheaply will do so, achieving the pollution reduction at the lowest possible cost to society.
I'll not get into the charges and cross-charges that surround the general idea of cap-and-trade, especially as it compares to direct taxation. What I want to talk about is why this mechanism is so attractive to people in the modern-day political climate.

That can be simply expressed (Pooley: "That's the trade in cap and trade, and it harnesses the power of the
marketplace to fight warming, a concept that helped Republicans like McCain, the presumptive GOP nominee, fall in love with the idea."). This is something that you hear all the time, that cap-and-trade is a market mechanism, and therefore superior to other forms of emission controls.

But, of course, this is nonsense. Cap-and-trade is market-esque, in that half of it is something that appears to be a market. After all, trading is the essential market activity, isn't it? But there's still that nettlesome word cap in the term, and that clearly has nothing to do with the market at all. Whenever an external body creates limitations to a market (or, as in this case, creates the market from nothing), we simply do not have a true market in the economic sense.

I understand there's a need to sell the idea of restricting carbon emissions, especially when it appears that there will be a cost, certainly in financial terms and probably in lifestyle changes, but to push one particular scheme ahead of others because it is "market-based" is spurious.

There's a difficult reality coming, and it's very unlikely that magic will occur and the pain eliminated. The easy way is to continue living as we have, burn oil and gas and coal, fueling a long-driving exurban life.

But it's ever more obvious that the easy way is no way at all. Things will change, and the nation that has been riding the highest on the status quo will have to change the most. That will be a tough realization for the United States, but a necessary one. Invoking the magic of the market won't ease any of the pain, and is intellectually bankrupt to boot.

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