Cap and Trade Could Lead Broke States Out of Recession


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The New York Times just ran a column called Don't Think That Cap-and-Trade Is Over--paradoxically, I might add, since just before that they ran one called Tracing the Demise of Cap and Trade. Anyhow, the conflicting reportage isn't the point (I already showed how the notion that cap and trade is somehow 'dead' is nonsense). No, the more interesting thing is the angle of the new column, which argues that cap and trade will persist, not because it is the best-crafted policy for curbing greenhouse gas emissions, but because it could be a cash cow for funding-starved governments still digging their way out of a global recession. Or, as the Times puts it, "carbon trading should soon look like manna from heaven for cash-strapped treasuries."Ooh--manna from heaven!

The crux of the argument seems to be that despite all of the woes that have besieged cap and trade in Europe, the dire need for revenue will compel states to stick by, toughen up, or enact carbon trading. Author James Kanter writes that "Carbon trading ... is on the cusp of generating mammoth amounts of money for governments -- money that could start flowing just in time to help nations emerge from the worst financial crisis in a generation."

Indeed--Kanter cites "an internal working paper released with little fanfare last week by the European Commission" that projects that "E.U. member states stand to make €26 billion annually by 2020 through regular sales, or "auctions," of emissions permits."

Here's more on the vast sums of cash that stand to be made:

The paper said E.U. governments could begin earning as much as €928 million a year starting in 2012 by auctioning permits to airlines, which will become the next companies to join the system. The paper noted that Germany had already auctioned some permits, in 2009, earning about €230 million that it allocated to development programs ...
That's all and well for EU states--how about a carbon trading system for the US? Glad you asked . . .
Such revenues could play a similar role in the United States, the paper said. Under legislation before Congress that would create a U.S. version of cap and trade -- although it is highly unlikely to be passed into law in its current form -- the U.S. government would earn a minimum of about $8 billion each year through 2020, the paper said.
A minimum of $8 billion a year is nothing to sneeze at--and that's under the pollution permit giveaway-laden Waxman-Markey bill. Imagine how much revenue a strong cap and trade bill would provide--one in which all permits were auctioned as opposed to given away. After consumer rebates--to which a large portion of the revenue would go to help soften the likely increased costs of electricity--there would still be a huge swath of funding that could be dedicated to other programs (High speed rail? Clean energy R&D; grants?).

Alas, while Kanter's column makes a good point about European states that already have carbon trading enacted wanting to keep it, I fear that the analysis matters little in terms for the United States. I'm sure Obama would love to have carbon trading providing a stream of revenue--a cap and trade system was outlined in the man's budget, remember. But I just don't see the fact that it would give revenue to government budgets helping much in selling the idea to the American public.

Highlighting that fact would only further carbon trading's reputation as a tax, and the American public is already cautious of government spending. Unless it's linked to enabling some really attractive policy ideas, I don't see the fact that cap and trade could provide the government with revenue being much of a selling point--and worse, it could actually make poorly informed voters (read: Fox News fans) mad.

It's senators that need convincing, and if they think a vote for carbon trading will anger their constituents, they'll steer clear. More than anything, it may lead US states to consider carbon trading systems--and give Californians another reason to hold on to its nascent one.

More on Cap and Trade
Cap and Trade Explained - The Short Attention Span Version
Cap and Trade Works: Europe to Hit Kyoto Targets with Ease ...

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