Friday, January 15, 2010

Cap and Trade Concerns: Is This the Best That We Can Come Up With?

It was with shock that I read a recent editorial by Sun Media’s Lorrie Goldstein. Now, "shock" isn’t an unusual emotion for me to experience when I start reading Goldstein, but this time the shock was a little different. This time, I found that I had little to disagree with Goldstein on in his editorial "Carbon credits are a scam to be feared".

Goldstein has been a vocal opponents of carbon credits emission trading. His opposition appears to stem from his belief that concerns about climate change are overblown by the "enviro-nuts". He has consistently argued that Canada would be economically disadvantaged if we actually tried to do something about reducing our carbon emissions. He also argues that it’s the biggest polluters, China and the U.S. who should be taking the lead, not Canada.

Goldstein likes to point out what he refers to as the "failure" of the European Emissions Trading Scheme in support of his opposition to carbon trading (what we used to call "cap and trade" not all that long ago). While I’m not ready to agree with Goldstein on this failure (Goldstein believes it has been a failure because global emissions continue to rise), I certainly have to question whether it’s been a success.

Goldstein’s general argument against carbon trading is that market manipulation has the potential to wreak havoc on the entire economy, potentially creating a bubble which could burst, making the current recession look insignificant. Goldstein suggests that it’s the bankers and big businesses who will be the ultimate beneficiaries of a carbon trading scheme, as they would be the ones to primarily profit, while the cost of emissions credits would be passed along to the consumers, who will be the losers.

Consumers will actually lose twice: first, by paying more for just about everything; second, for not actually seeing much in the way of benefit from reduced emissions, because Goldstein believes that the cap will be set so low as to have a negligible impact on reducing emissions (coupled with increased emissions from China and India). Goldstein is also not a big fan of off-sets, as he believes that they’re a complete boondoggle.

Goldstein believes that Canadians should be standing up and calling our government out for even thinking about involving us in such a negligent scam. Not only will global emissions continue to rise, but the economic impacts to Canadian businesses and consumers will be detrimental to our economy.

I think he’s on to something here. In theory, a "cap and trade" carbon emissions scheme would end up reducing emissions, but the cap has to be set high enough. Also, there needs to be clear direction regarding how the funds generated through the purchase of carbon credits are intended to be spent, with the majority going to real offsets (and certainly not to investments in questionable technology, like carbon capture and storage). The offsets have to be real and tangible.

In any event, though, the costs of pricing carbon in this way are going to be passed along to consumers. Sure, we consumers will expect to pay more for the same good or service in the future, but we may not be aware of how much more we ought to be paying. Hence, businesses could use the price of carbon credits as an opportunity to generate more profit, thus hurting consumers even more.

If the cap isn’t high enough, and if the majority of money goes into general revenues, and if the offsets purchased are of questionable value, and if companies are able to hoard credits during years of economic downturn when emissions are down anyway, and if clear pricing on goods and services are provided to consumers and if...

Oh my. There are already a lot of "ifs" there. Since I don’t really trust my government to get any of those "ifs" right, what chance is there on all of them?

Yes, clearly the bankers and big businesses might like the idea of carbon emissions trading. It need not be a threat to their bottom lines, as they may actually be able to take advantage of a scheme to generate revenue. And as those businesses grow along with their profits, will emissions be reduced? I think that the jury is still out on that.

What I do believe is that carbon emissions trading appears to be capitalism’s answer to being seen to be taking action on the environment, while having a positive impact on the bottom-lines of the business community.

I can understand that the Conservatives and Liberals would support this "solution" to address the climate change crisis. What I can’t understand is why the NDP have come out in favour of this particular mechanism as their primary method of reducing carbon emissions. It boggles my mind that the three major parties in Canada believe that this sort of scheme is the best way to price carbon. Well, maybe it is the best way to "price carbon" if the goal is to make money off of pollution. If you really want to reduce emissions, though, surely there must be a better pricing mechanism, no?

Here’s the kicker: even Lorrie Goldstein says that "if our governments are hell bent on putting a price on carbon dioxide emissions, a carbon tax would be better, with 100% of the money returned to taxpayers in income tax cuts."

Hmmm...that sounds very close to the Green Party’s position on taxing carbon. Put a hefty price on carbon emissions (something we don’t like), but pull back on other taxes, particularly income tax (something we want...less tax on our income). So we end up paying more for some goods and services, but we have more money in our pockets to do so. And the best thing is, if we choose to purchase goods and services with less of a carbon footprint, rather than carbon-rich goods and services, we will actually end up with more money in our pockets. Yes, we may have to make some changes to our personal spending habits, but that’s a good thing, because not only will we be helping reduce emissions, we’ll be enriching ourselves in the process.

We pay taxes, in theory, for the greater public good. Why not price goods and services accordingly? If something is bad for the public good, tax it at a higher rate. Right now, with regards to carbon emissions, we’re actually subsidizing them, because we used to believe that they were a net positive on the public good ledger.

Yes, yes, I know: Stephane Dion proposed something like this in the last election, and he was destroyed for it. Of course, we Greens also ran on this policy, and our percentage of the popular vote went up. As the federal Liberals have abandoned this method of carbon pricing, in the next election it appears that only the Greens will be presenting this option to voters.

Canadians should be very concerned about the carbon emissions trading scheme that our major political parties, and governments at the federal and provincial levels have been talking about (not to mention to the U.S.). It seems to me that it’s inevitable that before too long, such a program will be up and running, and our governments will say, "Look at us! We’re serious about fighting climate change!" We will have squandered all sorts of resources and political capital on getting this thing going, with only dubious results to show in a decades worth of time.

Here in Canada, you can certainly expect the oil industry to be exempted from having to participate. In the U.S., the coal lobby is doing all that it can to obtain an exemption for itself. If the biggest polluters are exempt from participation, how can that work to actually reduce emissions? The arguments for exemption, though ("jobs will be lost if no exemptions") will likely win the day under the current configuration in parliament.

Maybe we can get Lorrie Goldstein to endorse us.

Just joking.

1 comment:

Anonymous said...

His article a few days earlier was equally good.

"Cap & trade 'corporate welfare'"

And I'm not one of his fans on most issues. But I have been holding on to this article I cut out of the paper.