Both ideas have merit, but there is a tricky little history to “cap and trade,” which seems to be President Obama’s favored approach. Because the credits would be traded on an exchange, or somewhere else, their prices would fluctuate. They could even fluctuate wildly, as prices of traded items often do. (See the stock, bond and commodity markets if you’re looking for examples.)Bottom Line: He's right. C&T would help traders, politicians and corrupt businesses. They would (at BEST) be no better than carbon taxes for consumers and honest businesses. They would cost more to administer and be worse for businesses trying to avoid price uncertainty.
The European system of cap and trade has seen large fluctuations. Right now, because of the recession in European manufacturing, the cost of these carbon credits has fallen fantastically, rendering the cost of carbon emissions low. That doesn’t do much for reducing emissions.
Why add another element of uncertainty to energy production, especially if the goal of suppressing carbon-based fuel burning can be accomplished by another means? Energy companies have enough problems as it is — including reduced supplies, political risks and wildly changing prices for raw materials.
Of course, the new system would be a great benefit to the people who traded the credits. But how about the rest of us? Haven’t we just had a big lesson in what happens when we put traders ahead of producers and consumers? Have we forgotten that lesson already?
Why not do what governments usually do to reduce consumption — namely, impose a tax that punishes the production of carbon emissions? That would also be much less sensitive to manipulation by speculators — and the types of extremes that have led to our country’s recent undoing.
15 Mar 2009
Cap and Trade Sucks
Ben Stein points out the dangers of Cap and Trade: