Cap and Trade seems like an interesting concept to me. The idea of establishing a system designed to limit atmospheric pollution through market forces seems like something that would work in the world of economics... except this is the real world (hey-o!). By setting up a market for limited emission permits, with a decreasing amount being sold every year, the hope is that businesses will have an incentive to prepare for the decrease by establishing systems to limit and stop emissions. As companies successfully make the transition, or even just reduce their carbon output, they can trade the excess allowances that they have to companies that have exceeded their expected emission levels. Supposedly, this system is supposed to be able to help ease the transition with less regulatory effort and spending. In fact, SO2 emissions (which contribute to the creation of acid precipitation) were actually successfully reduced to a target level before the target year, with such a system playing a significant role. However, when it comes to carbon emissions, it's not just industry that is responsible- most adults drive a car to and from work each day, and with the number of people who do this on a daily basis, it is not a negligible contribution to the equation. I'm not sure if the companies that produce the cars would be held accountable for this to some degree, however, so perhaps it has been considered.
California is putting a Cap and Trade system in place, where about 62 million allowances (each permitting a ton of carbon to be emitted) are going to be auctioned at the start of the program in a three hour window, starting at $10 each. With another auction set for February, it would seem that this will be a seasonal event. Any companies that opt to not purchase during the auction window will still be able to get them on the market from other companies, but this initial auction is being held by the state. Most large companies that practically depend of the
emission of carbon pollutants get a break at the start of such programs,
though- after all, if Rome wasn't built in a day, then how would you
expect it to be remodeled and rebuilt in that time frame? With this consideration, "more than 400 of California's industrial
heavyweights... will get 90 percent of their emission allowances free
in the first two years, but the percentage of freebies will decline in
future years." While I think 90% may be a bit much, at the same time, it at least allows for the companies to start making changes before they start risking the possibility of bankruptcy from the system. However, even with this, some groups are still unhappy:
"Business groups say California could achieve its goals of
curtailing carbon without holding an auction. The state, they say, could
simply give away all of the emissions allowances for free, and then
enforce the cap. As companies move toward compliance, they will buy and
sell the allowances among themselves and a price will emerge for carbon. But [fortunately] state officials reject that argument. The Air Resources
Board says an auction is needed to jump-start the market and make sure a
competitive price for carbon is established."
One of the main reasons why I am inclined to think that the officials are right to do this, is that if the system were set up as the business groups would like, there would be too much potential for racketeering as companies realize that cooperation could be easier than competition in this matter. Besides, as much as some like to tout the idea of market forces, emissions aren't the most tangible commodity. I'm sure many companies, thinking of the permits as a sort of imaginary trade, would be inclined to imagine up more to trade than they have (I believe that something like this had a role in the Enron shenanigans) to make a quick buck.
One of the big things that gets me about the whole system is that monitoring of the emissions is rarely described. Best as I can tell from a Wikipedia entry, monitoring is mostly at the level of the installation responsible for the emissions, and the output is reported to a regulator. This seems like a cause for concern on two levels. One: what is there to guarantee that the numbers being reported are accurate? What prevents the company from muddling their numbers in a way that benefits them? Two: How are they measuring the output? There are certainly many advanced systems that have been made to keep track of such things, but they aren't always installed in facilities. When that is the case, and the company opts to not pay for the system, is there a way for them to check? It just seems like there are too many ways for companies to dodge around this sort of regulation, short of an official audit being performed.
Overall, I don't think that Cap and Trade will work the way that those who endorse it hope it will. However, I also am inclined to believe that it has the potential to work, if things proceed without too much incident. But even if it works, will the effort be too little, too late? The system is in place to monitor and limit emission levels- even if they are decreased, that doesn't mean that the total atmospheric levels are decreasing, just that the rate of accumulation is. We are already above the levels that scientists believe are "safe." At this point, there is the possibility that we are already doomed, and beginning efforts that would only have been effective if we had started them much earlier. Unfortunately, with that being the case, all we might be doing is delaying the inevitable.
Extra link:
http://www.storyofstuff.org/movies-all/story-of-cap-trade/
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