Hard Times for Cap-and-Trade
posted at 6:05 pm on February 24, 2011 by J.E. Dyer
Back in December, I reported on the woes of the Northeastern states’ Regional Greenhouse Gas Initiative (RGGI, or “Reggie”), which was having trouble generating the expected cash because recession-shocked Northeasterners were cutting back on all their household buying and their utility use. Of course, that didn’t stop state governments from raiding their RGGI accounts to pay for a bunch of stuff unrelated to climate-salvation theology.
C&T has suffered other setbacks recently, one from predictable human baseness and the other from a competing strain of high-victim-card politics.
First the baseness. Sensible Europeans realized back in 2009 that their C&T scheme, the EU Emission Trading System (ETS), wasn’t working. From its 2005 inauguration to 2008, Eurocarbon emissions rose 1.9%. But that’s not why the EU nations closed their carbon-trading registries in January, or why, as of last week, only six of the 30 national registries had reopened for business.
The reason for the dramatic mass closures was plain old theft. The ETS had been plagued by fraudulent trading for some time; analysis following a big Europol bust in late 2009 indicated that as much as 90% of the trading volume in the previous 18 months had been generated by fraudulent traders, many of whom used the most basic of fraud methods, closed up shop, and skedaddled. (H/t: CarbonTax.org)
There have been several IT attacks on the national registries as well, but a fake bomb threat in Prague in January, which cleared out the offices of the Czech national registry long enough for cyber thieves to steal thousands of carbon allowances, was the straw that put the camel in traction. National registries shut down left and right. By mid-February only one-fifth of them had resumed operation. The ETS spot market is in a state of suspended animation, trading having ground to a halt through the attrition of fraud-leery traders. Futures trading continues, with the price per tonne (metric ton) constant, as befits a wholly artificial commodity whose “value” depends entirely – most notably in a global recession – on the continuation of a government mandate.
Meanwhile, in North America, a state judge in January issued a tentative ruling to stay the implementation of California’s C&T scheme (one of the chief elements of Assembly Bill 32), scheduled for launch on 1 January 2012. The proximate justification for this ruling – seemingly extraordinary for a Bay area judge – is that the California Air Resources Board (CARB) failed to properly evaluate the impact of the scheme as required by the California Environmental Quality Act (CEQA). Ironic as it might seem that the archest of arch environmentalists could be hoist on their own petard, the reason parses immediately. The plaintiff bringing suit had a higher victim card to play.
There is a sense in which actual justice might be in view here. It is quite true that the various schemes of the left for reordering mankind fall hardest on the poor – and environmental crusades are notorious for doing so. The plaintiff in the case against CARB argues that a likely impact of implementing AB32 will be the siting of the state’s worst carbon “polluters” in poorer areas. The plaintiff’s concerns are, of course, well founded; multiple factors drive emission-prone installations to poorer areas, and a C&T scheme will serve to reinforce them.
Naturally, if you don’t view carbon dioxide as a pollutant, you aren’t worried that the poor will be in danger if they live where emissions of it are higher by a tiny margin. (Many carbon emitters do, it must be noted, emit other things too; part of the lawsuit’s argument is that CEQA requires looking at the totality of the environmental impact, which would include other types of emissions, some of which are less salubrious for human life.)
But the politics of this are both predictable and justifiable. If ending up in the vicinity of carbon emissions is a “price,” why should our law ensure that the poor will have to pay it?
Given that C&T has all along been a rent-seeking scheme, it isn’t surprising that it has been so easy to exploit and attack. The abstractness of its core “commodity” makes fraud virtually inevitable: unlike pork bellies or barrels of oil, it is never audited by the eventual delivery of tangible goods. The trader is never held accountable to an end result that is meaningful to individuals, who can reject the scheme and the trader’s role in it – withhold their patronage from the trading system – if the outcome turns out to be unappealably lousy. “Society,” the theoretical beneficiary, is stuck with the scheme, by government fiat, but has no meaningful way to count its profit or cost.
Sounds like a big pile of fraud, crony shenanigans, cynical diversion of funds, and unfair impact on the poor, just waiting to happen.