The Story of Cap and Trade

Several months back I posted about the Waxman-Markey climate bill and how it was being gutted by the fossil fuels industry and its allies in Congress. I was generally supportive of cap-and-trade as the best chance we had of getting a mechanism in place to drastically lower our carbon emissions, as climate science demands we must. Someone took me to task for my support of cap-and-trade in the comments of that post, and a vigorous debate ensued. Today, on the veritable eve of Copenhagen, it is perhaps worth revisiting that debate.

For a nice, animated argument against cap-and-trade, check out the newly released “The Story of Cap & Trade,” a video by Annie Leonard, who also made the much-loved video “The Story of Stuff.” In her new video, Leonard criticizes cap-and-trade as a product of the same thinking that got us into the climate crisis in the first place — creating and exploiting economic markets instead of safeguarding the environment outright. In other words, while she’s all for the “cap,” she’s not so down with the “trade” because of how easy such markets can be to manipulate.

I think this argument has a lot of merit, and, as Leonard points out, so do a “growing movement of scientists, students, farmers, and forward-thinking business people.” But I’m still not totally convinced that cap-and-trade isn’t the best mechanism for lowering carbon emissions that we’re likely to get in place in time to make a difference, if only because America needs to take the lead on stopping global warming if we’re to stand a chance, and anything perceived to interfere with unfettered capitalism is unlikely to fly in the good ol’ US of A.

I am not seeking to be an apologist for cap-and-trade, nor am I trying to lower anyone’s expectations of what’s possible. Perhaps I’m just being a bit too jaded, and other solutions that have been proposed are equally viable.

What are some alternatives to cap-and-trade? There’s always the option of imposing a straight-up tax on carbon pollution, of course. A carbon tax would be simple and effective, but it would never make it out of the American Congress alive.

Another idea is so-called “tax shifting” — lowering income taxes while raising taxes on environmentally destructive activities like purchasing gasoline. (Lester Brown discusses tax shifting in his book, Plan B 4.0: Mobilizing to Save Civilization. You can read an excerpt from the book dealing with tax shifting here.) I think this is a very interesting idea and probably the most viable solution other than cap-and-trade.

Another alternative to cap-and-trade, “climate debt,” was recently discussed by Naomi Klein in an article she wrote for Rolling Stone. The idea of “climate debt” is to make rich countries pay poor countries for the damage being done to them by climate change, a problem created almost entirely by rich countries.

Klein makes a persuasive case when she argues that the UN climate summit in Copenhagen “represents a chance to seize the political terrain back from business-friendly half-measures, such as carbon offsets and emissions trading, and introduce some effective, common-sense proposals — ideas that have less to do with creating complex new markets for pollution and more to do with keeping coal and oil in the ground.” When she writes about “complex new markets for pollution” she is of course referring to the carbon market that would be created by a cap-and-trade scheme. But how likely is it that we’d ever get developed countries to agree to this scheme? And how likely is it that we can overcome the incredible influence of an inordinately wealthy fossil fuels industry that is hell-bent on ripping those fossil fuels out of the ground without creating some incentive for them not to do so (perverse as that situation may be)?

I have always believed that a markets-based solution was not preferable, for many of the same reasons as Annie Leonard, in addition to an inherent mistrust of capitalist institutions in general. But like it or not, I’ve always kinda felt like there was no other viable option. And the bottom line is that we need to do something NOW. Creating a carbon market is by no means doomed to failure: The European carbon market got off to a rocky start, but now seems to be working, for instance.

Tax shifting makes a hell of a lot of sense, but it rarely even enters the debate. Of course rich countries paying their climate debt would be the morally righteous thing to do, but given that most developed countries won’t even discuss ambitious emissions targets, it’s hard to imagine them agreeing to pay reparations to developing nations.

What do y’all think?

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