[quote]DrSkeptix wrote:
Beowolf wrote:
Can someone who DOES believe in human-caused, EPIC DOOM, global warming comment on cap-and-trade?
I’m saying this because it is quite obvious those who don’t believe in the above will obviously not support cap-and-trade. I’m interested if anyone who DOES believe the above dissents from the cap-and-trade support-orgy.
Let us, you and I, assume that human-caused global warming exists.
Let us have cap-and-trade. Trade? This means that there is something of value to be traded.
Will there be a market in the excess caps? Will a company which burns less carbon than demanded then be able to sell its allotment?
If so, there will be a secondary market in carbon caps–options (calls and puts) and futures. (Check in on the Chicago Board of Trade or the Philadelphia Exchange in a few months.)
Well, all this makes sense on one condition, that the carbon caps, when purchased for a value, will be used.
How can carbon dioxide emissions be reduced if the caps are all to be used?
(Now the proponents of such a system say that it is already in use and working in the control of acid rain. I have not seen this verified.)
I am not convinced. Even if I were to believe in human-caused global warming, this is not a sufficient answer.
It only amounts to a tax on all human activity.
[/quote]
Let it be said, I don’t like Waxman-Markley. It’s a mess of a bill – too many giveaways, too many specific regulations, too much regulatory uncertainty, probably no net effect on carbon emissions. But let me explain a few things.
Yes, of course there will be a market in carbon futures. There’s already a small one in Chicago (Chicago Climate Exchange, run by Richard Sandor.)
The idea is that a certain number of carbon credits will be issued; an absolute cap on carbon that can’t be surpassed. Assuming this upper limit is lower than the amount of carbon currently emitted, then yes, all the carbon credits will be used. Permission to emit carbon is of value to any company.
Yes, emissions trading programs have been put in place for SO2, and they seem to have worked well:
http://web.mit.edu/newsoffice/1997/emissions-1217.html
My problem with cap-and-trade, aside from the imperfections of this particular bill, is that it introduces too much price uncertainty. With a carbon tax, you know the price of carbon for sure (it’s the tax amount) but you can only roughly predict how much emissions will drop. With cap-and-trade, you know exactly how much emissions will drop (it’s the cap level) but you can only roughly predict the price. The result is scary volatility, especially in the futures market – that’s what happened in Europe. It’s compounded by the political temptation to give permits away for free to favored industries. So nobody knows how many permits will be on the market in the future, how much they will cost to obtain, or what additional emissions regulations will be put in place.
In a perfect world, I’d favor a nice, simple carbon tax – but the policies that have the least potential for pork & favoritism never seem to get passed, do they?
(Note: of course Waxman-Markley, and any other emissions-reduction program, is a tax on energy consumption. Of course it is distortionary, of course it is redistributive, of course it is regressive. That’s definitional. And yes, those are bad things. Whether it’s worth it to incur those costs to stave off global warming is the most difficult question of the present, and I think anyone who’s certain of the answer is either lying or misunderstands the issue.)