Don’t Just Do Something—Stand There

Robert Samuelson has an article at Real Clear Politics this morning that hones in on the likely results of a “cap and trade” regime in the United States:

The chief political virtue of cap-and-trade — a complex scheme to reduce greenhouse gases — is its complexity. This allows its environmental supporters to shape public perceptions in essentially deceptive ways. Cap-and-trade would act as a tax, but it’s not described as a tax. It would regulate economic activity, but it’s promoted as a “free market” mechanism. Finally, it would trigger a tidal wave of influence-peddling, as lobbyists scrambled to exploit the system for different industries and localities. This would undermine whatever the system’s abstract advantages.

That been the experience with the EU’s system:

Fights have erupted as countries seek to guard their interests. Eastern European nations have lobbied for more generous allocations because of their communist legacies and lower living standards. Germany, the continent’s largest wind-energy producer, wants an E.U. mandate that each country get 20 percent of its energy from renewable resources by 2020; Poland, which uses no renewable resources, is resisting.

Germany boasts that it has cut emissions to 18.4 percent below 1990 levels, the benchmark used in the Kyoto Protocol and in Europe. But nearly half the reduction was because of sagging industrial output in the former East Germany after reunification. For the 2008-2012 period, E.U. officials sliced 5 percent off Germany’s emissions proposal.

Individual companies have also haggled over whether their historical records were representative emission benchmarks.

“A paper mill in Italy would get different credits from a paper mill in Germany, even if they are completely the same,” said Marco Mensink, energy and environment director of the Confederation of European Paper Industries.

Perversely, Europe’s cap-and-trade system has done little to reduce output at such places as the Janschwalde coal plant, Europe’s third-biggest carbon dioxide emitter. Each year, it spews more than 25 million tons of carbon dioxide. The dirty gray plant still has turbines and generators that date from Soviet times. It has nine cooling towers, and just half of its output can power all of Berlin.

There have been improvements in carbon emissions in Europe (the improvements here without such a system have been greater) but I’ve seen no attempts at disaggregating the effects of cap and trade and other EU policies aimed in that direction from the export of EU manufacturing to China which I believe is the primary cause of reductions in emissions and energy use both in the EU and here.

I have no objection to moves to reduce carbon emissions in principle, particularly moves that would reward greater efficiency. My own preferred policy would be a straightforward carbon tax. Less riggable. But I also think that we’re likely to get more bang for the buck by removing the vast array of government incentives that encourage greater energy consumption generally and greater oil consumption in particular. I have no illusions that such a plan would ever be adopted. Too many of our oxen would be gored.

If the next administration is a Democratic one I expect we’ll see greater moves in the direction of a cap and trade system. Its very complexity tends to be attractive to technocrats. However, with the political constraints that our legislators are feeling these days I think we’ll see even more out-and-out regulation without much in the way of measures to increase enforcement of the regulations. That has the benefit of appearing to be doing something about the problem without incurring the costs of actually doing something about it. Talk as always is cheap.

If the next administration is a Republican one I doubt that much substantive will be done, especially considering today’s Republican Party’s allergy to taxes. We’ll continue to make most of the same mistakes we’re making now.

3 comments… add one
  • Outis Link

    The chief political virtue of cap-and-trade — a complex scheme to reduce greenhouse gases — is its complexity…. Finally, it would trigger a tidal wave of influence-peddling, as lobbyists scrambled to exploit the system for different industries and localities.

    I imagine that from a profesional politician’s point of view this last bit may be the cap & trade schemes greatest advantage, especially for the Dems. After all, the oil and coal lobbies are more now likely to send money to the Reps than the Dems. This would likely change that after the first few years, not to mention all of the other influence peddling possibilities this would create.

    And please note that I’m not placing the Reps (particularly NOT the current elected officials) above the Dems in terms of being cleaner. They’re simply bought & paid for by a different lobby. If cap & trade becomes the reality they will adapt.

  • It’s a feature, not a bug.

  • PD Shaw Link

    The U.S. currently has cap and trade systems in some pollutants, and I don’t think they’ve had any of the worst case effects described above. The systems were advocated by free-marketers as preferred to pure command-and-control regulation (you will only emit z microns of substance k or prove to us you are using the best technology available to reduce substance k emissions).

    I’d make two points:

    Creating markets is not cost-free. In Illinois I believe the government’s costs are passed on as application fees to the emitter. Some might call that a tax.

    Second, complexity comes with a cost. In Illinois I’ve been told recently that it takes 3 to 5 years for the government to process and grant a new Clean Air Act permit. Not all of that can be blamed on emissions trading (perhaps only a little can be), but it keeps getting worse the more the mandates increase.

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