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By Kevin McCann
Why it matters:
Cap and trade will only be effective if done with transparency and integrity, as a means to address global warming…not if it's treated like another housing bubble.
Annie Leonard, who brought us "The Story of Stuff", a brilliantly concise treatment on rampant consumerism, has released another animated gem, this time about the pitfalls of the much lauded Cap & Trade system.
For the uninitiated, Cap & Trade is one of the leading legislative proposals to combat climate change. As mentioned in previous articles, our atmosphere currently contains about 390 parts per million (ppm) of carbon dioxide. At this concentration we've seen melting glaciers, drought, and famine. Scientists agree the maximum concentration for maintaining "life as we know it" is about 350 ppm.
The first step in Cap & Trade is, obviously, setting the "cap"…let's say 350 ppm by 2050 (we should be so lucky). Now comes the "trade" part, where corporate polluters are allowed to emit a certain volume of greenhouse gases each year. If they are smart enough to "green" their systems and processes, they might have left over "carbon credits" which they can sell, conceivably for a profit.
Enter Annie. There are three big flaws in most Cap & Trade proposals, according to Ms. Leonard.
1. For obvious ($) reasons, most "Cap & Trade" systems in effect around the world, and those being proposed here in the U.S. are actually more like "Cap & Giveaway" systems, where the allotted carbon credits will actually be given away to corporations, rather than requiring them to purchase them. As Annie points out, this is essentially rewarding the folks who have caused this problem in the first place, "We know you are egregious polluters, here are some free credits to sell to one another to boost your profits."
2. Carbon Offsets. Carbon Offsets involve a corporation (or NGO, or individual) paying to "undo" some of their emitting. If you're slack-jawed and drooling, you're not alone. Providers of carbon offsets (E.G. TerraPass) have made a business out of reducing carbon. You belch 20 lbs. of CO2 into the air? No prob, pay $40 bucks to this company that has REMOVED 20 lbs. of CO2 from the air. By buying carbon offsets you are effectively atoning for your carbon sins. But technically you are investing in a company. Unfortunately carbon offsets are difficult to quantify, and if it's cheaper for company to buy them than actually reduce emissions, you can imagine which option they'll choose. Which brings us to…
3. Distraction. Leonard's final "Devil in the Details" is actually a condemnation of the concept as a whole. Despite being much maligned for the supposed strangle hold it would put on the economy, "Cap & Trade" is a popular environmental solution to those on Wall Street. And why not? A highly malleable, nebulous security. Sound familiar? Sub-Prime Mortgages anyone? Credit Default Swaps anyone?
Commentary:
The real key to a successful cap and trade system is the "cap." Unfortunately, most current proposals focus more on the "trade." In an attempt to please the corporate world, every effort has been made to make to keep the system flexible. "You can solve climate change by buying and selling securities." Unfortunately someone has to actually, physically reduce emissions.
Some have suggested that a "carbon tax" would be more effective. Just the word "tax" is enough to send some folks running for the hills, but a carbon tax might be a more effective incentive for corporations to clean up their act.
But why can't everyone be happy? Why can't a "Cap & Trade" work? It can, actually, but there are a few criteria.
1. "Cap" is key. The goal is to curb emissions. Full stop. Every aspect of the system must be in service of an effective goal. I'd say 350 ppm sounds pretty good.
2. Reduce > Offset. There must be incentives for companies to reduce emissions rather than taking the easy way out. Maybe…
3. Burst the bubble. Give carbon credits a significant, non-negotiable value. If a credit is worth a $1 million, the companies who have the most to sell will have some walking around money and happy share-holders, while the worst polluters will be left in the red with their smoke-stacks in their hands. Pardon the euphemism.
Creative Solutions:
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