The cap and trade scam

Sebastian Mallaby:

The good news on climate change is that the world wants to do something. It's no longer just the Europeans and a few fellow travelers; a recent survey suggested that 96 percent of South Koreans and 66 percent of Ukrainians regard global warming as an important threat. The latest report from the Nobel-anointed Intergovernmental Panel on Climate Change got the blanket media coverage it warranted. In the United States, business and congressional leaders have decided action is inevitable.

Then there is the bad news: None of these fine sentiments will matter unless a critical mass of countries unites around a real policy. And unity is miles away. Former Treasury secretary Larry Summers remarked recently that today's climate debate is like the U.S. health-care debate of 15 years ago. People agree that action is essential, but they disagree so fiercely on the details that action may prove impossible.

Start with the international arena. Delegates from around the world will meet next month in Bali, supposedly to launch negotiations on a successor agreement to the Kyoto Protocol. But there is no consensus on what these negotiations should accomplish. Should they aim to create some kind of global cap-and-trade system? Should they go for a series of narrower agreements on biofuels, forest conservation and so on? Should they help countries adapt to global warming, since some warming is inevitable, or emphasize efforts to stop the warming in its tracks? The first task in Bali will be to negotiate what to negotiate about.

The one certainty in Bali is that excessive ambition will backfire. The failure of the Doha trade talks has shown that the multilateral system is clogged: It cannot deliver tariff cuts even though the intellectual case for trade is more widely accepted than at any time in recent history -- think of the transformation of once autarkic nations such as Brazil, India and China into successful globalizers. Given Doha's failure, the idea of negotiating a global cap-and-trade regime seems absurdly ambitious. Trade boosts countries' prosperity, so a deal should in principle be doable. But climate action imposes costs, and negotiators are likely to argue forever about who pays what.

Faced with that prospect, some argue that the United States should force collective action on foreign foot-draggers. The leading Senate climate bill, written by Joe Lieberman and John Warner, would threaten countries that fail to curb emissions with a quasi-tariff. The logic is that, if rich countries limit emissions while developing countries don't, greenhouse-gas-intensive industries will migrate to developing countries. And if developing countries have dirtier factories than rich ones, the perverse effect of limits on greenhouse gases in the United States might be that global emissions go up.


Recall how salary caps are supposed to level the playing field in Baseball? Paying over the cap requires the Yankees and the Red Sox etc. to pay a tax distributed to the other teams. It really hasn't worked and the rich teams keep driving up salaries. Cap and trade will drive up the cost for some businesses but will not reduce the overall production.

The Warner-Lieberman "solution" looks like the Taft-Hawley tariffs that were responsible for the depression with a green bow on it.

I don't think we are going to find a solution to reducing CO2 emissions in any form of restrictions, because there is too much incentive to ignore them and no real method for enforcing them other than tyranny. The best answer lies in efficiency of production and adaptation to a warmer climate. With the temperature here in the 40s all weekend, warmer sounds better anyway.

There are too many reasons to believe that this is an artificial crises anyway. Other planets with no men on them are warming up too, which suggest a certain hubris by those who think men are responsible for the warming.


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