JS online 'Cap-and-Trade's Unlikely Critics: Its Creators'
Economists Behind Original Concept Question the System's Large-Scale Usefulness, and Recommend Emissions Taxes Instead
In the 1960s, a University of Wisconsin graduate student named Thomas Crocker came up with a novel solution for environmental problems: cap emissions of pollutants and then let firms trade permits that allow them to pollute within those limits.
Now legislation using cap-and-trade to limit greenhouse gases is working its way through Congress and could become the law of the land. But Mr. Crocker and other pioneers of the concept are doubtful about its chances of success. They aren't abandoning efforts to curb emissions. But they are tiptoeing away from an idea they devised decades ago, doubting it can work on the grand scale now envisioned.
"I'm skeptical that cap-and-trade is the most effective way to go about regulating carbon," says Mr. Crocker, 73 years old, a retired economist in Centennial, Wyo. He says he prefers an outright tax on emissions because it would be easier to enforce and provide needed flexibility to deal with the problem.
Mr. Crocker, who went on to become a professor at the University of Wyoming, is one of two economists who dreamed up cap-and-trade in the 1960s. The other, John Dales, who died in 2007, was also a skeptic of using the idea to tame global warning.
"It isn't a cure-all for everything," Mr. Dales said in an interview in 2001. "There are lots of situations that don't apply."
Mr. Crocker sees two modern-day problems in using a cap-and-trade system to address the global greenhouse-gas issue. The first is that carbon emissions are a global problem with myriad sources. Cap-and-trade, he says, is better suited for discrete, local pollution problems. "It is not clear to me how you would enforce a permit system internationally," he says. "There are no institutions right now that have that power."
Europe has embraced cap-and-trade rules. Emissions initially rose there because industries were given more permits than they needed, and regulators have since tightened the caps. Meanwhile China, India and other developing markets are reluctant to go along, fearing limits would curb their growth. If they don't participate, there is little assurance that global carbon emissions will slow much even if the U.S. goes forward with its own plan. And even if everyone signs up, Mr. Crocker says, it isn't clear the limits will be properly enforced across nations and industries.
The other problem, Mr. Crocker says, is that quantifying the economic damage of climate change -- from floods to failing crops -- is fraught with uncertainty. One estimate puts it at anywhere between 5% and 20% of global gross domestic product. Without knowing how costly climate change is, nobody knows how tight a grip to put on emissions.
"Once a cap is in place," he warns, "it is very difficult to adjust." For example, buyers of emissions permits would see their value reduced if the government decided in the future to loosen the caps.
"This allows your local polluter to merely buy credits elsewhere and continue polluting while passing his costs on to you."
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Also The OilDrum has some helpful and current hints on subject:
The Case for a Carbon Tax to Control Climate Change (Part I)
Cap-and-trade is very complicated and little understood by the public, creating an ideal environment for horse-trading by special interests.
The Case for a Carbon Tax to Control Climate Change (Part II)
In contrast to cap-and-trade, carbon usage fees are relatively transparent, making it harder for greenhouse gas-producing interests to finagle sweetheart deals at the climate’s expense.Equally important: A carbon-based tax addresses people’s resistance to bearing additional costs directly.
