Even Friends of the Earth Comes Out Against Cap and Trade

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Green, Macroeconomics

In a new report called “A Dangerous Obsession”, Friends of the Earth claims that the Cap and Trade system in Europe fails to limit carbon emissions and risks creating a speculative bubble similar to the sub prime bubble in a Telegraph newspaper report. The environmental charity, strong supporters of carbon reductions wants cap and trade to be replaced by direct taxation and legislation saying all the system does is enrich traders and does not drive carbon reductions. If the USA adopts a similar scheme, it will grow from the current $90bn market into a $3.1 trillion one over the next decade. As we have reported previously, the permits were largely given out free to polluters giving them no incentive to reduce carbon emissions. Where polluters have needed more, they have simply sold them to the developing world, mostly China. When the Chinese bring renewable energy sources on line such as wind power, this results in a a European subsidy for Chinese wind-farm developers and a significant transfer of wealth.

In a separate article, the US Government Accountability Office (GAO) commenting on the European model concluded that “carbon offsets . . . may not be a reliable long-term approach to climate change mitigation. Whether the system is effective is only part of the problem, may be an even bigger problem is that Friends of the Earth are not alone in worrying we could be creating a hugely complex speculative bubble which will benefit banks, traders and financial institutions but not the wider public. Their enthusiasm can be seen by the numbers, according to the Center for Public Integrity’s analysis of Senate disclosure forms. Banks and other financial groups had about 130 climate lobbyists in Washington by last year. Goldman Sachs is said to have largely designed the US system on their own, and guess who’s going to be one of the principal market makers designing derivatives products of ever greater complexity?

I can’t pretend I am a fully paid up member of Friends of the Earth. I sympathize with many of their views in terms of protecting the environment but feel the objections to development and progress among some of their supporters is at odds with the lessons of history. However on this score we do appear to be in agreement, Cap and Trade, at least our experience in Europe, has been a dismal, expensive failure and is likely to become a lot more expensive before politicians are willing to admit they got it wrong.

–Stuart Burns

Comments (4)

  1. RCJ says:

    This cap and trade legislation spells economic disaster for the US. It creates a market rife with opportunity for manipulation and corruption. it also raises our energy costs exponentially and will cause companies to ship jobs overseas. Write your Congressmen and voice opposition t0 cap and trade at http://tiny.cc/H2nlj.

  2. PJL says:

    Our experience with cap and trade in the United States, however, has been very successful. Nitrous oxide and sulfur dioxide were reduced much more quickly and inexpensively than anyone projected as a result of the Clean Air Act of 1990.

    Also, to the cost argument, independent analyses from the non-partisan Congressional Budget Office, the Energy Information Administration, and the Environmental Protection Agency all separately determined the cost to US citizens would be about three or four dollars per month.

    CBO: http://energycommerce.house.gov/Press_111/20090620/cbowaxmanmarkey.pdf

    EIA: http://energycommerce.house.gov/Press_111/20090804/eia.aces.factsheet.pdf

    We’ve learned from the mistakes of Europe, and we do not have noncomplying countries within the US. Tell your Senator to support carbon-capping legislation!

  3. admin says:

    It’s true to say that the sulfur dioxide program worked in the US but once scaled for carbon, has been ineffective in Europe.

    I don’t believe either of those two studies cited actually account for the impact of cap and trade on GDP. But please clarify if I am wrong.

    With 10%+ unemployment, an expected “jobless recovery”, massive taxes in the form of pending health care legislation, among others, I’d argue exactly the opposite. More oppressive regulations will stifle innovation and more important, job creation.


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