Cap and trade woes
This entry was posted on 3/26/2008 10:02 PM and is filed under Local action,Action,Economics.
Cap and trade is not the answer to our global warming dilemma - it's complex, risky for markets and costly for everyone (except for those that run the carbon markets).
From an article two weeks ago in The Wall Street Journal online - Economist Strikes Gold In Climate-Change Fight. Excerpts:
Yesterday, Climate Exchange's stock jumped 16% after the firm reported a tripling in 2007 revenue to £13.6 million, or about $27 million. That gives the company, which handles about 90% of the trading on carbon exchanges, a market capitalization of roughly $1.31 billion. Mr. Sandor's 20% stake is worth more than $260 million on paper.
The U.S. hasn't ratified Kyoto. But all three leading Democratic and Republican presidential candidates say they want the U.S. to do more to fight climate change, and would likely set up a carbon-trading program.
Some economists argue for taxing polluters instead, including Nobel prize-winning economist Joseph Stiglitz, and former chairman of President Bush's Council of Economic Advisers, Gregory Mankiw. A carbon tax, they say, would be more transparent and less vulnerable to lobbying by industries trying to win higher caps for themselves.
Last month, a report by the Congressional Budget Office said a carbon tax could achieve the same emissions reductions "at a fraction of the cost" of a cap-and-trade system. The savings stem partly from the fact that such a policy is simpler to implement than building a carbon market.
Europe's own system shows evidence of these strains. Governments there initially yielded to industry pressure and allocated too many carbon permits, giving companies little immediate incentive to cut their emissions.
The system, which has been up and running only three years in Europe, hasn't yet produced big reductions in emissions. But carbon trading has boomed -- handing a tidy profit to banks, traders and exchanges such as the one founded by Mr. Sandor. Power companies and heavy industry trade carbon continuously to try to make money off price fluctuations and to hedge their future risk, as well as to comply with Kyoto rules.
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Why are the three leading U.S. Presidential candidates behind cap and trade and yet most economists (derived from 'economy') are not? What can we do to change this?
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P.S. - Participate in Earth Hour on Saturday March 29, 2008 at 8pm and spread the word!:
http://www.earthhour.org On March 31 2007, for one hour, Sydney made a powerful statement about the greatest contributor to global warming – coal-fired electricity – by turning off its lights. Over 2.2 million Sydney residents and over 2,100 businesses switched off, leading to a 10.2% energy reduction across the city. What began as one city taking a stand against global warming caught the attention of the world.
In 2008, 24 global cities will participate in Earth Hour at 8pm on March 29. Earth Hour is the highlight of a major campaign to encourage businesses, communities and individuals to take the simple steps needed to cut their emissions on an ongoing basis. It is about simple changes that will collectively make a difference – from businesses turning off their lights when their offices are empty, to households turning off appliances rather than leaving them on standby.
