Lately, there’s been a lot of buzz about cap and trade policies as a possible solution to global climate change. The European Union has already implemented a cap and trade system (albeit with limited success), and President Obama wants to follow suit as a major part of his clean energy plan. I know this will come as a surprise to everyone, since I am a newspaper columnist and therefore ethically bound to criticize everything, but I approve of this policy.
Cap and trade is actually a two-part policy. The first part, the cap, limits how much greenhouse gas (mostly carbon dioxide) industries can produce. The government would give and/or sell permits to industries which allow the industries to only produce an established quantity of gas. Over time, this quantity would decrease, forcing businesses to produce less and less gas.
The second part, the trade, is less straightforward. In one of the few legal instances of businesses actually making money by selling nonexistent products, industries that produce less than their permitted amount of gas could sell the excess to industries that produce more than their permitted amount.
This would reward clean industries by making their cleanliness a tradable commodity. At the same time, dirty industries would be penalized; they would have to pay for their pollution, encouraging them to clean up their act.
My favorite part of this policy is the fact that it requires so little work on the government’s part – it passes the buck to private business. All cost and responsibility for cleaning up industry falls squarely on the shoulders of the private sector, which is where it belongs, considering dirty industry is responsible for bringing about the threat of climate change in the first place. All the government has to do then is regulate the industries.
This is the cap and trade policy’s advantage over other ideas that have been tossed around. Clean coal and nuclear power plants require heavy government investment, and still only (poorly) address emissions from power plants. Ethanol, besides being a bad use of farmland, is heavily subsidized. And truly renewable energy projects, like wind and solar, currently require large government grants to be economically competitive.
Cap and trade would also make clean solutions to climate change cheaper, but the money to do so would largely come from other industries, not the federal government’s nonexistent coffers.
There’s a catch, though. No matter what politicians say, cap and trade is not a solution to global climate change. It is, however, a perfect stopgap measure. It encourages private industries to find their own solutions to climate change, but doesn’t provide a solution in and of itself. However, in the short term it can limit the amount of greenhouse gas produced while making clean, renewable technology economically competitive.
In the long term, however, it runs the risk of falling prey to corruption, as has been seen in the European Union. Some businesses would gain more political clout than others, and thus be able to get their greenhouse gas caps relaxed. Other businesses might eventually learn to skew their emissions data.
Furthermore, cap and trade might eventually legitimize dirty industry, since it doesn’t outright ban greenhouse gasses. Wealthier businesses would be able to quietly pay for their overproduction of gasses, not reforming at all.
Besides, it would set up a market for trading these gasses, with investors actually making money by buying and selling unproduced pollution. Should such a market form, it will be nearly impossible to cut emissions, since people would be depending on the production and trade of greenhouse gasses for their livelihoods.
Cap and trade, therefore, should never be treated as a solution to climate change; in the short term it only encourages the development of solutions, and in the long term, it could actually harm attempts at reform. It is, however, the most practical stopgap measure available to us right now.
