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The Crunch on Carbon Credits
Michael considered fate at 14:16   |   Permalink   |   Post a Comment
I sat on the couch last night with an Economist between me and the tele in an attempt to avoid as much of the prime time as I could, despite my unending appetite lately (or, perhaps it is just complete laze, no mind). The article that made me chuckle the most outlined America's Climate Security Act (ACSA):
.. it is sponsored by John Warner, a Republican who once opposed all such measures.. it has won the support of Max Baucus, a senator from Montana, whose coal-mining constituents hate the idea.
Already suspect, if only because people don't change their minds overnight, me thinks. I'm guessing the support has more to do with the questionable schemes and loopholes built into the bill than anything to do with saving the actual environment.

The basis of the bill, at first look, seems alright:
ACSA involves a cap-and-trade scheme: the government sets an overall limit on emissions and then sells or gives away an equivalent number of tradeable permits to pollute. This allows the firms that find it cheapest to reduce their emissions to do so, leaving those for which cuts would be costlier to buy permits.
Which means that companies that can cheaply reduce emissions (cheaper than the cost of permits) will make that choice for economic reasons, whatever the company's green outlook. That is fine and dandy, until the market of emissions permits becomes a monster of its own. Manipulations will no doubt arise and large amounts of money will change hands for the right to continue to pollute, which begs the question: where will this money go?
Most bills envisage compensation of some sort for dirty industries, which would suffer most from an emissions cap. Friends of the Earth estimates that ACSA would dole out $324 billion to the coal industry, for example, in addition to awarding it free permits worth hundreds of billions of dollars more. Beyond that, most congressmen want to funnel any spare cash to pet causes: renewable energy, biofuels and perhaps even nuclear plants, even though they produce no emissions and so should prosper under a cap.
But we need to stop and ask ourselves if renewable energy will prosper and, if it does, why that has anything to do with whether or not we should be subsidizing it. Earlier posts on this very blog point out the hypocrisies in many subsidizing situations (think, agriculture, for example) so would it be so horrible to support companies that intend to wipe out the very need for emissions-producing industries, even if it is unfair? Where do we want to be in 20 years? 40 years?
Some senators worry that the costs of a cap-and-trade scheme may spiral out of control. They suggest that the government should cap the price of permits by agreeing to sell more of them at a fixed rate if they get too expensive. That, in turn, has angered the green lobby, who say that it is the bill's environmental benefits, rather than corporate profits, that should be sacrosanct. ACSA attempts to square this circle by setting up a sort of central bank of carbon, which would allow firms to borrow permits against their future allocations. That might help to smooth out spikes in the carbon price, without lifting the overall cap. The bill also allows firms to pay for “offset” schemes to reduce emissions in industries that do not have a cap, such as agriculture and forestry, in lieu of making cuts of their own.
So now we have already heard a number of caveats and buts and ifs that work heavily to make the bill moot; no more than a shuffling of money, permits and credits. A bill that protects heavy pollution industry.

What's worse, in our age of global markets, is yet more protectionism:
ACSA's biggest concession to industry, however, is a clause that would penalise imports from countries that do not have an emissions cap. To get such goods through customs, importers would have to buy permits to cover the greenhouse gases emitted during their manufacture.
And you can guess who likes those ideas.

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