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The Greenhouse Gas Emission Trading Scam
by Michael Silverstein
Online Journal Contributing Writer
Mar 22, 2007, 01:34

To help check global warming, the European Union has adopted a plan that seeks to cap emissions of the gases that promote the greenhouse effect. This plan, which various groups are seeking to emulate in this country, not only limits emissions from greenhouse gas generators, it includes an emissions trading component.

The caps on emissions make good sense and are certainly needed. The trading scheme is counterproductive hokum, a foolish construct of misguided energy intellectuals and Wall Street hustlers.

Emission trading as a way to foster faster and more comprehensive reduction of greenhouse gas emissions is an idea that seems, upon first hearing, inherently silly. It comes across as a mechanism that allows entities that find it inconvenient to meet cap requirements quickly, or defer them altogether, to buy their way out of doing so.

To counter this perception, proponents of the trading scheme bill it as a free market solution to the problem. They claim that companies that are more efficient in meeting their own cap requirements will be encouraged to become even more so in order to create more trading credits that can be sold to those that are less efficient. The job of reducing greenhouse gas emissions in this construct is portrayed as more market friendly, and therefore reaches the desired goal in a more expeditious, cost-effective manner.

If such patter reminds you of that old Hans Christian Anderson fairy take, “The Emperor’s New Clothes,” it_s not surprising. Just as the weavers of a supposedly magic clothe silenced possible opponents by claiming that only those worthy to hold their posts could see this material, purveyors of emission trading silence skeptics by saying these people are afraid to think outside the box, are unable to appreciate counter intuitive ideas, and, horror of horror, favor regulatory rather than free market solutions to problems.

There_s more to the rapid acceptance of the emission trading model as a way to cut greenhouse emissions than clever rhetoric, however. It_s an approach that neatly fits the current needs of major players in the greenhouse gas arena.

Entities that don’t want to meet cap requirements, or do so quickly, can buy their way out of doing so by purchasing traded credits. Companies that do meet these requirements generate a salable asset in the process. Wall Streeters who operate emissions trading exchanges can rope in buckets of cash. Environmental groups can demonstrate they are pro-business and free market supporters. And governments that still cling to a seemingly unshakable belief that forcing greenhouse gas emitters to find and adopt innovative ways to clean up their act will hurt the economy can avoid doing so for a while longer.

Indeed, there’s only one party in this process that will suffer from emissions trading: The natural environment. Or to phrase this more accurately, the natural environment as it is presently configured.

What then is wrong with emissions trading? To see the answer, just think of that little boy who called out when the emperor passed by, “He’s not wearing any clothes,” and apply the same observable, commonsense logic. The following analogy might help.

Suppose there's a highway with a very strictly enforced 60-mile an hour speed limit, and anyone who goes over that limit, even by a little bit, gets a speeding ticket. And suppose you’re driving on this highway and don’t want to get a ticket. How fast would you drive?

Exactly 60? Or 59 1/2? Or even 57 or 58 miles an hour? Of course not. You couldn’t take the chance that your foot would hit the gas pedal too hard, or that even a strong wind might come up behind you and send you over the speed limit. To safely meet the speeding requirement and be sure of not being ticketed, you’d travel five miles or more under the speed limit.

Now consider an entity that seeks to get under a greenhouse gas emissions cap. Would it change its mode of operation to get exactly under the cap? Of course not. Because any flux in its operations, any expansion of these operations, any breakdown, could kick it over the cap limit. To ensure this wouldn_t happen this entity would take steps to get under the cap by a considerable amount.

It would do this merely to meet a legal requirement, not with any idea of creating a salable, tradable credit. The credit would come into being incidentally as a bonus for what would have been done anyway. An artificial asset would be created simply for obeying the law.

And the overall upshot of such legal compliance? Many, many greenhouse gas emitters would have an awful lot of collective credits to peddle to greenhouse emitters who find it desirable to put off their own compliance -- at least in the near term. And because of the surfeit of these tradable credits among entities complying with the law, there would be little or no incentive for a lot of compliers to go beyond what they would have done anyway to achieve compliance, because this would flood an already crowded market and reduce the value of salable credits even further.

A greenhouse gas credit trading system is guaranteed to work wonderfully from the perspective of having a lot of credits traded, allowing its proponents to claim great success. The fact that a compliance buyout system (which is what an emissions trading system should really be called) works against rapid reduction of greenhouse gas emissions will be buried in fuzzy numbers and free market blather for years.

Emission trading schemes are an intellectual fraud. They contradict what every sensible person understands intuitively. Their widespread acceptance is the product of the short-term interests of powerful groups, free market fetishism run amok, and cunning “dare to think new ways” Wall Street sales talk.

People who really care about cutting greenhouse gas emissions who buy into this intellectual fraud are contributing directly or indirectly to delaying meaningful greenhouse limiting standards. Which is another way of saying they are working against the interests of the natural environment they purport to support.

© 2007 MichaelSilverstein

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