Two recent Star Tribune pieces address the need for comprehensive energy/carbon policy. The first argued that congressional indecision is counterproductive for both investment and the environment ("Midwest hurt by energy dithering," Dec. 27). The second, from two Copenhagen participants, urged enactment of federal cap-and-trade legislation ("Copenhagen a good first step," Dec. 28).
Certainty on carbon is needed to accelerate renewable investment. But cap and trade is the wrong way to achieve it.
Instead, efforts need to be redirected toward a better approach: a carbon tax.
In theory, cap and trade works by setting a limit on overall emissions (the cap), requiring emitters to purchase emission permits, then allowing those permits to be bought, sold, arbitraged, etc., on a newly created "carbon market" (the trade). A market is said to produce reductions more efficiently than traditional command-and-control regulations.
Supporters point to the success of a similar scheme for sulfur dioxide emissions. While sulfur emissions have decreased, addressing greenhouse gas emissions through cap and trade is orders of magnitude more complicated. And Europe's experiment with carbon markets suggests it won't reduce carbon emissions.
So why is cap and trade favored by many? Two reasons:
First, supporters aren't motivated by an unbending confidence in free markets. Instead, they support cap and trade because they don't have to call it a tax -- which they have accepted from the start to be politically impossible.
Second, Wall Street supports cap and trade. The "evolving carbon market" is predicted to become the world's largest commodities market -- far bigger than corn, citrus, gold or pork bellies -- supposedly growing to more than $3 trillion by 2020.
Orginal de Star Tribune: