Sucking the lemon we sold
Source Gar Lipow
Date 09/06/01/20:56

Cap-and-trade: filling up the political space that should be used for
real solutions.
Sucking the lemon we sold
By Gar W. Lipow

ONE OF THE LEAST discussed flaws in the Waxman-Markey bill’s attempt
to tackle the climate crisis also illustrates the fundamental problem
with cap-and-trade. The bill strips the EPA[1] of much of its existing
authority to regulate greenhouse gases, in return for the new, weaker
authority granted under Waxman-Markey. The existence of this authority
is one of the strongest levers that can be used to push through new
climate legislation, and it should not be given up in return for
something this weak. Under recent Supreme Court rulings, existing EPA
is authority is quite strong, albeit required to be implemented in
less than optimum ways. The offset provisions, along with reduced
targets during the first ten years, guarantee this bill will produce
few or no emission reductions if passed. In the name of not letting
the perfect become the enemy of the good, Waxman-Markey lets the
perfect become the enemy of the good. It trades actual emissions
reductions for acceptance that cap-and-trade is the right means of
reducing emissions.

And ultimately filling up political space is what cap-and-trade does.
When a cap-and-trade bill is on the table most of the conversation and
political activism around climate change is concentrated on
cap-and-trade. Should we accept this version of cap-and-trade or
fight for a stronger one? Or do some heretics want to question
cap-and-trade? (When a cap-and-trade bill is off the table, most
political effort is aimed at getting one on the table.)

The “trade” part of cap-and-trade is a way to put a price on carbon
emissions. Such pricing is not the most important part of solving the
climate crisis. As Jeffery Sachs says (in the course of a note to
Kevin Drum supporting the Waxman-Markey bill) : “… putting a market
price on carbon emissions (through either a tax or permit system) is
just one modest part of a truly comprehensive and effective carbon
mitigation strategy, that must involve standards, R&D, demonstration
projects, and many other kinds of incentives and public policies”.
When environmentalists and environmental groups put most of their
climate efforts into winning an emissions price that is a tremendous
misplacing of priorities.

But it is even worse when the mainstream chooses to support
counterproductive means. Emission trading has historically proven
less effective than alternatives on a small scale, and failed when
used on a large scale [2]. Sulfur, considered the great triumph of
emission trading, demonstrably reduced U.S. acid rain more slowly, by
less than rule-based regulations did in France and Germany. The much
vaunted cost savings of sulfur trading compared to initial estimates
overlook that most pollution reduction schemes, whether trading or
standards-based cost less than initially estimated[3]. When trading
was extended to multiple pollutants in the RECLAIM scheme in Southern
California, this failed miserably, and had to be restarted - this time
with the trading scheme reinforced by the type of regulation typically
slandered as “command & control”.

So how did we get to the point where trading is seen as THE solution
to the climate crisis, with everything else as mere reinforcement or
an inadequate and unrealistic substitute? Long before the Kyoto
treaty, most of the world knew emissions would have to be reduced. It
was taken for granted that treaties would lead to national
regulations, national public spending, probably reinforced by some
sort of carbon tax. But all this was happening during the ideological
triumph of Reaganism and Thatcherism, long after the actual time in
government of Reagan and Thatcher had passed. Regulation? Taxing?
Public spending? These were all seen as old fashioned failed policies.
We needed something new and exciting, something that could be labeled
as government free. And out there was the Sulfur trading story. Sulfur
trading may not have worked as well as the U.S. as old fashioned
standards based rules had in the EU. But it had not failed completely.
Even though trading ultimately required the government to create a new
property right, it looked as though the government was not involved,
if you squinted, and closed one eye, and rubbed something in the
remaining eye to blur its vision.

So when Kyoto came along, there was shock and awe from hundreds
lobbyists from the EDF and the World Bank, and other environmental
groups who thought themselves beyond left and right [4]. Complementary
to this, Al Gore argued from the U.S. perspective for carbon
trading[5]. Fight global warming the same way the U.S. fought acid

And how did this work out? During the three year period where we have
verified emissions, emission among traded entities rose by 1.8%[7].
(During that same period emissions for the EU as a whole fell[8].)
According to preliminary figures emissions fell by 3.06% for 2008. It
is widely agreed that much of this was due to economic recession, and
warmer weather, and widely argued that a substantial minority was due
to the trading system. However just as EU emissions fell a bit while
ETS emissions rose, I suspect that once the data is out we will find
EU emissions dropped much more steeply that the comparatively small
drop in greenhouse gases from traded entities. The overwhelming
evidence is that the European Trading Scheme is retarding rather that
driving emission drops.

Why has trading held on to shut a strong mindshare in the
environmental community? Part of it is ideology: supporting trading is
a way to be pro-environment and not be a Dirty F__ Hippie (DFH). Part
of it is that a whole lot people make money from carbon trading, and a
lot more want to. So trading supporters get more money and resources,
which lets them do a better job of presenting their views. Part of it
is tribalism: a lot of the people beloved by a certain type of
centrist liberal support trading. So if Al Gore and Waxman and Markey
think highly of trading, who hell Hansen or Greenpeace, or anyone not
part of the magic circle to question their wisdom. Part of it is a
wish to rejoin the world again, to be part of a joyous reunion in
Copenhagen where the U.S. is welcomed back in the circle of nations.
The U.S (helped by elites in other nations) persuaded the world back
in 1997 that emission trading was the right path. We sold that lemon;
now it is our turn to suck it!



John Larsen, Alexia Kelley and Robert Heilmayr; Brief Summary of the
Waxman-Markey Draft; April 20 2009; World Resources Institute
# Prohibits EPA from:
* Classifying GHGs as criteria pollutants on the basis of their
climate impacts (Sec. 831, pg. 490)
* Designating any GHG as a hazardous air pollutant on the basis of
its climate impacts (Sec. 832, pg. 490)
* Setting New Source Review standards for GHGs on the basis of
their climate impacts (Sec. 833, pg. 490)
* Considering the climate impacts of GHG emissions when issuing
operating permits under Title V of the CAA (Sec. 834, pg. 490)

Gar Lipow, Emissions trading: A mixed record, with plenty of failure.
Grist Magazine, Feb 19, 2007.

Hart Hodges, Falling Prices: Cost of Complying With Environmental Regulations
Almost Always Less Than Advertised - EPI briefing paper, Economic
Policy Institute, 01-November-1997

Carbon Trading: A critical conversation on climate change,
privatization and power.
development dialogue no. 48 september 2006
Larry Lohman (Ed.). Chapter 2 ‘Made in the USA’ pp 31 - 69

Kyoto Protocol - Climate Lab.
” The United States played an important role in the international
negotiations leading up to the drafting of the 1997 Kyoto Protocol.
Vice President Al Gore was a main participant in putting together the
text of the Protocol, and President Clinton said it was
environmentally strong and economically sound.”

Finding the Ratchet: The Political Economy of Carbon Trading Donald MacKenzie

”At the insistence of the US, Kyoto gave its signatories sulphur-like
flexibility in how to meet their commitments. A country with a Kyoto
commitment can meet it by controlling emissions domestically.
Alternatively, it can pay for reductions made via projects in
developing countries without Kyoto targets (that Kyoto provision is
the‘Clean Development Mechanism’) or via projects in other
industrialised countries(such ‘Joint Implementation’ projects are
mainly to be found in the former Sovietbloc). Indeed, a nation-state
signatory can simply pay another signatory forreductions the latter
has made beyond its commitments.”

Emissions trading: 2007 verified emissions from EU ETS businesses,

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