Cap and trade schemes are expensive and ineffective

The absurdity of the growth-retarding Kyoto Protocol and similar "cap and trade" schemes are enormously expensive and relatively ineffective at addressing climate change, says Julian Morris, executive director of International Policy Network.

Consider the predicament of former communist and current European Union (EU) members:

Eastern European emissions fell substantially in the early 1990s following the collapse of communism, as they replaced an aging power infrastructure and closed down inefficient industries.

But rapid economic growth in these former communist countries also fuelled their greenhouse gas emissions – though they are still well below their 1990 levels.

When the EU cut their emission allocations far below the levels those governments had originally expected, it meant fewer permits for the new member countries to sell.

This will drive up the price of each permit, making everyone else in the EU pay more for their emissions.

In addition, even if the Kyoto Protocol were fully implemented, its effect on the climate would barely be discernible, says Morris:

It would merely delay the projected warming by less than a decade over the course of the next century.

Meanwhile, the economic cost has been estimated at between 0.1 per cent and 3 per cent of gross world product.

Even at the lower end, that is an enormous price to pay for essentially no benefit.

A more cost-efficient and effective alternative would be to invest in new technologies that could cut greenhouse gas emissions in the future, says Morris. One way is to impose a small but rising tax on carbon. Such a tax would motivate private-sector investments in climate forecasting, since companies would want to know what the tax level was likely to be in coming years. This would introduce long-needed competition and progress in a field currently dominated by government funding.

Source: Julian Morris, Cap and Blockade, Wall Street Journal, August 13, 2007.

For text: http://online.wsj.com/article/SB118695672951395380.html

For more on Global Warming Treaties: http://eteam.ncpa.org/issues/?c=treaties

For more on Environment Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=31

FMF Policy Bulletin/ 21 August 2007