Reports from the Economic Front

by Martin Hart-Landsberg

Economics and the Environment: What is Wrong with Cap and Trade

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It doesnt look like much is going to happen in Copenhagen at the Climate Conference.  The developed countries do not appear interested in negotiating a binding treaty with meaningful carbon reduction.   The police are out in force to make sure that the protesters don’t complicate things, as the picture below  illustrates.

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Riot Police handcuff activists of the Reclaim Power demonstration near the Bella Center in Copenhagen, Denmark

But just in case environmental catastrophes do finally force a serious discussion of solutions,  it is worth examining the preferred mainstream response to the challenge of reducing greenhouse gas emissions: cap and trade.

Here is a ten minute fun film that presents and critiques cap and trade–it is called The Story of Cap-and-Trade.

And there are things to read here and here if you want to learn more about why it is not the best response.

Oh yes, the US proposal for Copenhagen–while the science and most of the third world calls for reducing greenhouse gas emissions by 40 percent by 2020 compared with 1990 levels, the US is proposing cuts of 17 percent by 2020 relative to 2005 levels.  Put in terms of 1990 standards, the US is proposing a 4 percent reduction.   The Europeans are willing to go as high as 20 percent.

Most importantly the US and the EU are pushing to break the tie between the current talks and the 1997 Kyoto process.   The reason is that Kyoto involved a legally binding treaty and most scientists and third world countries want to extend that treaty though the current negotiations and have it include sanctions for countries that fall short in meeting their emission reduction obligations.   The US and the EU, on the other hand, want an agreement that is largely voluntary.

To be clear, when the US and the EU make their proposals it is not out of ignorance of the consequences.  As the New York Times reported:

environmentalists alerted reporters to the existence of a six-page document, dated Dec. 15, that appeared to be a detailed compilation by the U.N. office managing the talks of all the major countries’ pledges and plans for curbing their emissions, along with a calculation suggesting that they would not hold the global temperature rise under the goal of 2 degrees Celsius goal that world leaders have set.

Without stronger action both before and after 2020, “global emissions will remain on an unsustainable pathway,” the document read, “with the related temperature raise around 3 degrees C.”

People involved in the climate talks confirmed the authenticity of the document

Written by marty

December 18th, 2009 at 12:30 pm

Posted in Environment

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