Is cap and trade the solution? Don’t bank on it!

Watch this: “The Story of Cap and Trade” from the people that brought you “The Story of Stuff”. I love this animation for so many reasons, starting with the Einstein quote in the opening credits, “We can’t solve problems by using the same kind of thinking we used when we created them”.

Annie Leonard outlines that there are three major problems with cap and trade: free permits, false offsetting, and distractions from the real solutions.

Cap and trade has previously been used for sulfur dioxide to stop acid rain. Its success was limited because the permits were over allocated and “banked” by the polluters so that they could drag out their emissions. And while some reports claim that cap and trade worked, a 40% reduction in SO2 emissions is not entirely a success.

K-Rudd recently tried to bring cap and trade to Australia but his Emissions Trading Scheme (ETS) was opposed and now he is directly attacking the polluters with the proposed Mining Tax. This carbon tax methodology is similar to the cap and trade except that it doesn’t involve trading on the market and has the potential to be implemented fairly by the government.

Unfortunately, these solutions are essentially the same- the carbon tax is just implemented through the government while cap and trade is implemented through the market. Through the market, there are loopholes and incentives to cheat which could lead to the next bubble and stock market crash. Through the government, the same loopholes and cheating incentives exist but the bubble could crash the Australian budget rather than the carbon market. As Annie Leonard points out, a crash in the market (or budget) is too risky when our planet is the collateral. Furthermore, we haven’t really been very creative here… what happened to using a new kind of thinking as Einstein suggested?

K-Rudd couldn’t get the ETS through and now he has shifted to the Mining Tax in an attempt to save his position as Prime Minister. K-Rudd’s incentive relies on the power of the democratic voter. However, there is no monetary incentive to vote for Cap and Trade or the Carbon Tax because both of these methods will potentially lead to less money in the bank as the costs are passed on to the consumer. If there is no incentive to vote for it, then there is no incentive for K-Rudd to bring in the policy. At the moment, green energy costs more than fossil fuel energy and this needs to change. K-Rudd should give money to green energy initiatives now so that the price of green energy is cheaper than fossil fuel energy. To fund this we will need to stop fossil fuel subsidies and add the carbon tax. But the only way this will work is if the voters can see that Carbon Tax + Green Energy = no extra cost to consumer. Good luck! I still think we need some more creativity in our solution to this problem.

2 thoughts on “Is cap and trade the solution? Don’t bank on it!

  1. Cheers for the heads up. It’s a good little piece and although I had few minor grumbles, in general she’s dead on. We definitely need to change our ways of thinking – that will certainly be key to a brighter future.
    Recently, on another blog I used to have a lot of respect for, I faced what can only be described as business as usual under new mask. Although I agreed that III and IV gen reactors are probably our best bet to move away from CO2 emissions sooner, I just asked why shouldn’t we remain mindful of energy efficiency? After tearing into me as a “hairshirt green” and that “you’re more than happy to walk to the markets, however, we won’t”, and “why not drive a bigger SUV if we’ve got abundant energy?” I had to leave.
    My main argument is that it’s this cheap and abundant energy that is the problem. As Annie says; big business moved to poorer areas where they ain’t heavily taxed, wage is cheap and there is little to no environmental concern and need for proper waste management. With energy so cheap, this is the most cost effective method, but continues to undermine ecological value.
    The way forward isn’t backwards, nor is it through business as usual (regardless of the energy supply), it’s through new and innovative thinking.

  2. I don’t think Annie (or you) understands cap and trade as well as you think. For example, whether permits are given away or auctioned does not affect the final distribution and thus environmental outcome. Offsets are a political and a monitoring problem not one with the policy itself. See here for detailed analyses…

    My biggest issue with the video, though, is that I do not see another solution out there that will encourage innovation like cap and trade most certainly does. Forget about who is getting rich for a second and reflect on the fact that the climate problem will NOT be solved unless the cost of alternative energies is competitive with fossil fuels. This is fundamental, is there another policy approach out there that can achieve this as efficiently as cap and trade? I haven’t seen one…

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