Cap and trade: a failing gamble in Europe

posted at 8:25 am on August 5, 2008 by Ed Morrissey

With cap-and-trade policies coming from the presidential nominees of both parties, one might think that earlier adopters of these carbon-trading systems had enjoyed wild success.  As Business Week reports, that’s not been the case in Europe, and people there have begun to worry.  Like a Ponzi scheme, the only way that they can avoid taking huge losses in jobs and new businesses is if they can convince everyone to play along:

The continent’s bureaucrats hope their counterparts in China, India, and the US will embrace carbon regulation next year in Copenhagen.

The bureaucrats that run the European Union’s day-to-day business aren’t known for taking risks. Yet back in 2005, when they devised the EU Greenhouse Gas Emission Trading Scheme (EU ETS), these pencil pushers gambled that a cap-and-trade scheme would help cut the EU’s carbon dioxide emissions. Now, three years on, the environmental benefits from the EU ETS remain unclear: The continent’s CO2 output actually rose 1.1 percent last year. …

The continent has banked its financial future—and moral authority—on creating a low-carbon economy. This gamble’s efficacy now depends on the likes of China, India, and the U.S. deciding whether to embrace carbon trading. “Copenhagen will play a big part in showing that Europe’s creation of a cap-and-trade carbon market will pay off,” says Mark Spelman, global head of strategy at consultancy Accenture (ACN).

If, however, a global agreement for CO2 isn’t reached, many energy-intensive industries reckon their European businesses will be the only one to shoulder the higher costs needed to cut emissions. The extra financial burden eventually could send European jobs overseas and increase costs there.

That’s exactly what could happen here, as well.  Assuming we implement a cap-and-trade system of any sort that burdens American businesses, those that have the ability to shift jobs overseas will do so, and the rest will fail in competition.  This hurts small businesses the most, which have the least flexibility to outsource manufacturing operations, which will bear the brunt of any carbon capping system.

The same issue sunk Kyoto.  Bill Clinton signed the treaty, but the Senate unanimously passed a resolution rejecting it, specifically because it did not bind China, India, and other developing nations to the same kinds of limitations.  Ten years later, cap-and-trade still is exclusively Western, and the same economic risks remain.

Europe can’t even point to success in its own cap-and-trade system to entice the US or any of the developing nations.  They’ve tried to cook the numbers by jiggering the baseline calculations for their metrics, but the truth is that carbon outputs have increased under the European system.  Meanwhile, the US has cut emissions by 1.3% during the same period without a cap-and-trade system.

The EU hopes that the US doesn’t notice its failure, and that we use our clout to bring in a few more saps.  At this point, the only thing that can save Europe’s business class is the hope that everyone else is too stupid to realize that they’re being conned.


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Check out who was father of the year…

http://worldnetdaily.com/index.php?fa=PAGE.view&pageId=71460

ninjapirate on August 5, 2008 at 8:31 AM

Here’s Ed:

Meanwhile, the US has cut emissions by 3% during the same period without a cap-and-trade system.

Here’s the article he linked:

The department’s Energy Information Administration said Wednesday that preliminary data shows a 1.3 percent decline in the amount of heat-trapping carbon dioxide released in 2006 from energy-related sources, the first decline in 11 years and the biggest decline since 1990. . . .

Whether the decline of 78 million metric tons was an anomaly, or an indicator of something more, was unclear.

So a preliminary report claimed that in the year 2006 only, US carbon emissions in the energy sector only dropped by less than half the percentage you claimed for the entire US, and they’ve chalked it up to an abnormally warm winter? I mean, did you even read the post you linked?

Keep hope alive Ed!

e-pirate on August 5, 2008 at 8:35 AM

Meant to write 1.3%, sorry about that. Thanks for the tip. The point is that we’ve managed to limit carbon output without cap-and-trade, which has done nothing for Europe.

Ed Morrissey on August 5, 2008 at 8:42 AM

Man I need a second post even on this one. You’re killing me.

That’s exactly what could happen here, as well. Assuming we implement a cap-and-trade system of any sort that burdens American businesses, those that have the ability to shift jobs overseas will do so, and the rest will fail in competition.

Yeah this makes sense if you live in a crazy world where many American companies aren’t already outsourcing due to labor costs. Really, does any legitimate economist actually forsee a noticeable bump in outsourcing due to cap and trade, over other factors?

On the other hand, implementing government owned health care would reduce the costs of labor hear in the US, and help roll back the outsourcing deluge, but I don’t see you singing the praises of that plan?

This hurts small businesses the most, which have the least flexibility to outsource manufacturing operations, which will bear the brunt of any carbon capping system.

So small businesses, which by definition are small and thus least likely to have major carbon footprints, would get hurt the most by cap and trade? Not mass manufacturers who have large factories and bigger emissions problems? How do you square that one?

e-pirate on August 5, 2008 at 8:43 AM

Meant to write 1.3%, sorry about that. Thanks for the tip. The point is that we’ve managed to limit carbon output without cap-and-trade, which has done nothing for Europe.

Ed Morrissey on August 5, 2008 at 8:42 AM

But you haven’t proved that point. You linked a year old blog post that said emissions in the energy sector declined during a year with a warm winter & higher energy costs.

You also neglected to mention that US CO2 emissions in 2007 grew by 1.6% link.

e-pirate on August 5, 2008 at 8:48 AM

So small businesses, which by definition are small and thus least likely to have major carbon footprints, would get hurt the most by cap and trade?

Are small businesses not to be regulated the same as large businesses? Are they not to pay higher utility and fuel bills?

Ed’s point was that they are less able to adapt because they have less resources.

The Whistler on August 5, 2008 at 8:57 AM

Cap-and-trade is just the next scam by liberals after ethanol. Steven Harper, the conservative Prime Minister of Canada, has said that cap-and-trade policies would “screw” every man, woman and child in Canada. His choice of words reflects an eloquence that Obama and McCain cannot begin to comprehend.

volsense on August 5, 2008 at 9:02 AM

“implementing government owned health care would reduce the costs of labor hear in the US”

Sure, it would just mean skyrocketing taxes for substandard care.

I agree that private businesses should not be funding health care, but an even worse solution is to turn over health care to the government.

The government can’t even remotely handle all of the responsibilities it has now. But we’re supposed to have confidence that it can take on 1/7th of the nation’s economy and do it well?

Please.

NoDonkey on August 5, 2008 at 9:20 AM

1) There is no global warming, the earth is cooling.
2) CO2 is beneficial to the planet, it has no ability to cause warming.
3) Cap & Trade is nothing more than an enormous global Tax Scam, we must tell our elected officials we will have no part of it.

Maxx on August 5, 2008 at 9:31 AM

Aside from the military (and they’re not in any way perfect), when has a government EVER operated anything efficiently or cost effectively???

We need to get away from the idea that Government is a “Solution” to our problems. It’s not!

FloridaBill on August 5, 2008 at 9:38 AM

Yeah this makes sense if you live in a crazy world where many American companies aren’t already outsourcing due to labor costs. Really, does any legitimate economist actually forsee a noticeable bump in outsourcing due to cap and trade, over other factors?

[e-pirate on August 5, 2008 at 8:43 AM]

It isn’t a question of “over” it’s a question of “in addition to”. You should be asking where on the list it is — reason #1, Reason #10 or somewhere in between. It’s rather disingenuous to suggest, in a back door way, that since there are x factors, it shouldn’t be a big deal to pile on with another one that might not be the greatest factor.

Taking a hypothetical wherein business fleeing overseas is now at a macro-state of equilibrium vis-a-vis onerous current regulations, what is the probability that with an very onerous regulation added, the marco-state of equilibrium is is again unbalanced?

So small businesses, which by definition are small and thus least likely to have major carbon footprints, would get hurt the most by cap and trade?

It’s also a little off point, both in the effort to reduce carbon emissions and in addressing efficiency, to ignore the a propensity for small businesses to have a higher carbon emission to unit produced than large businesses. In other words, you want large businesses to increase their already high efficiency even higher while overlooking the greater gains to be made by having small businesses increase theirs from a middling efficiency to that of large businesses.

But it’s easier for environmentalists to demonize a smaller segment of the business world rather than a larger one because the large one will be more successful in fighting the slurs and smears before the regulations can be implemented.

Dusty on August 5, 2008 at 9:38 AM

On the other hand, implementing government owned health care would reduce the costs of labor hear in the US, and help roll back the outsourcing deluge, but I don’t see you singing the praises of that plan?

e-pirate on August 5, 2008 at 8:43 AM

Of course once nationalized, health care would run as efficiently as Congress and look what a huge success public schools have been. When the schools were private the big problems were kids chewing gum, now they are shooting each other, government did that. Government health care would at least be expensive, whether it was available or not.

So small businesses, which by definition are small and thus least likely to have major carbon footprints, would get hurt the most by cap and trade? Not mass manufacturers who have large factories and bigger emissions problems? How do you square that one?

e-pirate on August 5, 2008 at 8:43 AM

Who cares? Why pick this nit? Global warming is a fraud and cap and trade is just more taxes for no reason other than to to make a select few richer. So why even think about instituting it when its a scam?

Maxx on August 5, 2008 at 9:43 AM

Oops, sorry. Somehow hit submit before I was finished.

Government, in a single country, is ineffecient in every case. Adding the complexity of MULTIPLE governments to the mix means even greater inefficiencies and costs!

Need proof, read the last 30 days of the Daily Mail about anything to do with the EU. All the formerly sovreaign states of Europe have been cedeing power to the EU which is nothing more than another layer of beurocracy and taxation on the member states. It will be the same with any “Cap and Trade” scheme.

FloridaBill on August 5, 2008 at 9:44 AM

You also neglected to mention that US CO2 emissions in 2007 grew by 1.6% link.

e-pirate on August 5, 2008 at 8:48 AM

Yes, that’s true, CO2 continues to rise. And 2007 may have been the coldest year of this century, while CO2 continues to rise. Thus no connection between CO2 and and so called global warming, which isn’t happening in the first place. You want Americans to pay huge new taxes for nothing, are you nuts?

Maxx on August 5, 2008 at 9:55 AM

C&T is the largest, global tax scam in the history of makind.

And it wouldn’t just affect business – big or small. Everyone uses energy so EVERYONE would gets taxed.

You use electricity to heat/cool your home, cook your food, run your appliances, etc. The energy producers get hit with higher operating costs to produce the carbon producing energy – so to keep their operations in the “black” they institute a “carbon fee” on your monthly electric bill. The more electricity you use (the higher your “carbon footprint”), the higher that fee is.

You pay more for the gas you use in your car. Fossil fuels are carbon fuels – need to add a “carbon fee” for that too.

Then the cost of everything goes up since those “carbon fees” are attached to everything – if something doesn’t directly use energy, it was made using energy, so additional cost is added in for that.

And who controls all of this? More local, state and federal pencil necks.

And how far would it go to think that energy would eventually be “controlled”? “Mr. Smith, you used too much electricity at your home/business (or both) last month. You exceeded your average “carbon allotment”, so your carbon allotment for this month has been reduced by X%.”

C&T isn’t about anything but government control and wealth redistribution.

catmman on August 5, 2008 at 10:04 AM

I think, e-pirate, that they key phrase you are missing in Ed’s post is “during the same period”.
So EU’s went up and ours went down, when looking at this particular time point, presumably similar winter weather that year, thus apples to apples.
Yes, it will be interesting to continue to compare emissions, restrictive caps vs. technology/incentives, but you will need to be fair about it.

Deb on August 5, 2008 at 10:08 AM

Ed,

Don’t hold your breath, the Europeans gave up their economic and scientific ingenuity a long time ago.

Lance Murdock on August 5, 2008 at 10:12 AM

At a time where there is growing evidence refuting the claim that man made greenhouse gases are the principal elements driving climate change (global warming is out since that line no longer holds up with the latest data) we are supposed to risk our entire economy on a hair brained scheme whose only real effect will be to have money change hands. As with any con game most of the gains go to the ‘cons’ running the scam and, in this case, a large percentage will end up in the greasy palms of the politicians so that crooks can run their game without interference.

Given the parade of imbeciles who usually get elected get ready to pay because this will be the scheme to lard up incumbents campaign war chests for re-election and as such it may replace the pork barrel as a bipartisan taxpayer rip off.

Annar on August 5, 2008 at 10:29 AM

I think we should model ALL of our economic and energy policy after the juggernaut that is the EU. And don’t even get me started on their superior, efficient health care system.

World Village Revolution!!!

Who’s with me?!?!?

BigWyo on August 5, 2008 at 10:34 AM

But you haven’t proved that point.

e-pirate on August 5, 2008 at 8:48 AM

You and your global warming hucksters haven’t proved that Cap and Trade is anything other than an enormous global tax scam.

Maxx on August 5, 2008 at 10:43 AM

And little New Zealand, after having bravely struck a free trade agreement with China, is about to institute an ETS scheme even more restrictive than Europe’s. All this because its [hopefully soon to be outgoing] PM wants to create a “legacy” on the same level of Lange’s “no nukes” legacy circa 1984…and the sad thing is, the Labour Party in NZ is collectively too dense to understand what they lost with that pitiful little stand.

If NZ’S ETS legislation is passed, watch entire industry segments leave that country and (shocker!!!) end up in Asia…but at least there will be a place for tourists to visit, even as its own population leaves for Australia in droves.

Wanderlust on August 5, 2008 at 10:55 AM

The EU hopes that the US doesn’t notice its failure

squeezing their eyes real tight

On the other hand, implementing government owned health care would reduce the costs of labor hear in the US

are you out of your mind?

urbancenturion on August 5, 2008 at 11:01 AM

On the other hand, implementing government owned health care would reduce the costs of labor hear in the US, and help roll back the outsourcing deluge, but I don’t see you singing the praises of that plan?

e-pirate on August 5, 2008 at 8:43 AM

Have you gone daft ?

elgeneralisimo on August 5, 2008 at 11:04 AM

e-pirate on August 5, 2008 at 8:35 AM

Carp all you want. The fact remains that Cap and Trade IS NOT WORKING in Europe. All the Europeans are getting for their efforts are higher energy costs and a generally higher cost of living.

hillbillyjim on August 5, 2008 at 11:08 AM

1) There is no global warming, the earth is cooling.
2) CO2 is beneficial to the planet, it has no ability to cause warming.
3) Cap & Trade is nothing more than an enormous global Tax Scam, we must tell our elected officials we will have no part of it.

Maxx on August 5, 2008 at 9:31 AM

I am skeptical on any absolute statements on the relationship between CO2 and global warming. I believe that studies have demonstrated clearly that CO2 levels were higher during warmer periods, but what came first;the chicken or the egg.

I know how the enviornment works to reduce atmospheric CO2 in periods of high CO2 levels in the atmosphere, but there are the same number of carbon atoms here today as there were billions of years ago. The only difference is where those atoms exist in our system.

The global warming crowd believes the carbon causes warming, and transfering carbon from deep in the earth to the atmosphere via exhaust is the culpret.

In the past, vulcanism transfered carbon in a big way into the atmosphere, and huge plankton blooms transfered carbon back underground. But, that does not prove that the high levels of atmospheric carbon caused warming.

To make all these policies based on this hunch makes no sense.

saiga on August 5, 2008 at 12:06 PM

C&T isn’t about anything but government control and wealth redistribution.

Read Obama’s Energy Policy on his web site. In it he wants to create a national “smart energy grid” which would provide government with the ability to control energy usage directly.

CA recently proposed something similar that would have allowed utility companies to reach inside your home and adjust your thermostat. These new devices were to initially be mandatory on new home construction, then later as retrofits on existing homes.

Is anyone else concerned about giving liberal government that much control over our lives? And for what? A flight of fancy about manmade global warmng?

(BTW Sydney, Australia had snow last week for the first time in over 150 years. Although some claim that it was “soft hail”, not snow. Damn Global Warming.)

in_awe on August 5, 2008 at 12:09 PM

Thus no connection between CO2 and and so called global warming, which isn’t happening in the first place. You want Americans to pay huge new taxes for nothing, are you nuts?

Maxx on August 5, 2008 at 9:55 AM

Wrong. There is a connection, but no proof the CO2 caused the warming. There is definate proof that CO2 levels were higher during warmer geologic periods. The CO2 came from higher volcanic activity, but saying that increased CO2 levels caused the warming is an unproved theory.

The warmer climate could have caused the increased CO2 from major plant die offs.

saiga on August 5, 2008 at 12:13 PM

The warmer climate could have caused the increased CO2 from major plant die offs.

saiga on August 5, 2008 at 12:13 PM

I don’t have a citation, but IIRC, the amount of CO2 released from the oceans increases during warm periods as well. That the warming causes the CO2 increases seems to me as plausible a theory as the reverse, and there is mounting evidence that this is so.

hillbillyjim on August 5, 2008 at 12:49 PM

Wrong. There is a connection, but no proof the CO2 caused the warming. There is definate proof that CO2 levels were higher during warmer geologic periods. The CO2 came from higher volcanic activity, but saying that increased CO2 levels caused the warming is an unproved theory.

The warmer climate could have caused the increased CO2 from major plant die offs.

saiga on August 5, 2008 at 12:13 PM

saiga, CO2 simply has no property that allows it to have anymore effect on temperature than oxygen or water vapor. In fact according to this cart, CO2 has far LESS ability to absorb infrared than either Oxygen or H2O (water vapor). Now combine that fact with the fact that CO2 only makes up one-third of one percent of the atmosphere and you begin to see how absurd it is to claim that CO2 has any impact on temperature.

Slight variations in the sun’s output cause overall climate change and CO2 plays no part in it. CO2 is plant food and what people exhale and is a REQUIREMENT in the atmosphere for life to exist on the planet. There in nothing whatsoever harmful about CO2. Yet the people pushing the global warming fraud cling to demonizing CO2 because its the perfect thing to tax. No business or person can exist without creating CO2 everyday. Thus CO2 is the perfect scapegoat for taxation.

Also, nature puts about 99% of CO2 in the air, the amount that is man-made is yet again totally insignificant. Even if CO2 had some ability to absorb heat at a faster rate than either oxygen or H2O, which it doesn’t, cutting out ALL man-made CO2 would have no meaningful impact. Global warming is a scam from start to finish, and the demonization of CO2 is strictly a means by which to implement the fraudulent tax scheme of Cap and Trade.

Maxx on August 5, 2008 at 1:09 PM

“Copenhagen will play a big part in showing that Europe’s creation of a cap-and-trade carbon market will pay off,”

This scam is sort of like states having laws against gambling, yet having a state lottery.

Johan Klaus on August 5, 2008 at 1:30 PM

The point is that we’ve managed to limit carbon output without cap-and-trade, which has done nothing for Europe.

Ed Morrissey on August 5, 2008 at 8:42 AM

Maybe if we sold our plan as “cap-and-trade,” they`d buy it. It`s all about marketing. :)

ThePrez on August 5, 2008 at 3:01 PM