On June 2, 2008, the provinces of Ontario and Québec announced that they were planning to introduce a “cap-and-trade” system in order to try and stop climate change.
The cap-and-trade system is already in use in Europe. Under the program, the government arbitrarily sets an overall limit (cap) on total emissions. Based on this cap, the government then arbitrarily puts quotas on the amount of CO2 firms or utilities can emit.
Finally, government arbitrarily allocates “allowances” to each firm that represents the volume of their quota. Firms are required to meet the CO2 quota in one of two ways: (1) by reducing their emissions; or (2) by purchasing (trading) “allowances” from firms that have more than they need.
If this whole process sounds like a bureaucrat’s dream, it is. A recent article by Steven Mufson in the Washington Post described the system as a “bureaucratic morass with a host of unexpected and costly side effects and a much smaller effect on carbon emissions than planned.”
Although the cap-and-trade approach is touted as market driven, the foundation that it rests on is totally arbitrary. This is because no one knows how much impact, if any, a one-ton reduction in carbon dioxide has on the weather.
Moreover, according to the International Energy Agency, global C02 emissions are expected to accelerate over the next several decades, largely due to increased carbon-based fuel use in Asia. Consequently, any objective quantitative assessment of the benefits of cap-and-trade in terms of CO2 reduction is impossible.
While the benefits of cap-and-trade are impossible to quantify, the costs are not. In Europe, energy-intensive industries are being forced to cut back on production, due to the high cost of electricity.
Cement plants, which are also energy intensive, are planning to import raw materials from countries not subject to the cap-and-trade system. In Germany, the cost of electricity for consumers has risen by 25% since the system was introduced and will probably go higher because of it.
Just as we have found with the increased production of biofuels, the cap-and-trade CO2 system appears to have major hidden costs and very questionable benefits.
Member Comments
Apologies for some poor grammar and missing text in my note above - internet connection has been playing up!
I would like to contest that anything about a ‘Cap and Trade’ system is ‘arbitrary’.
Firstly, the ‘cap’, or overall limit placed on the carbon emissions of a country (or region) is based on targets whic that country or region sets for Greenhouse Gas reductions. For instance, BC has legislated to reduce carbon under the Climate Action Plan, and has set a target for emissions reduction of 33% by 2020 over 2007 levels (Bill 44). Caps would be set to meet interim targets with the goal of reaching this target by 2020. How targets are calculated may not be …
Western countries were happy (and lucky?) enough to lead the pack in consuming the lion’s share of the world’s carbon for the last 200 years or so. Now that the world is looking for similar leadership from the West in curbing and then reducing that same appetite, the author seems to be conveniently pointing the finger towards Asian countries to “pull together with us” and that until they are ready, willing and able to do so (perhaps in 20 or 30 years?), there is no point in the West lifting a finger to address our own behaviour.
Sure, cap …
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