A devastating critique of cap-and-trade

“You can only compromise to a point before a solution isn’t really a solution.”

That, in a sentence, is about as succinct a critique of the cap-and-trade legislation pending in Congress as you are likely to read. For more, when you have 10 minutes, watch the video below from Annie Leonard, best known as the creator of The Story of Stuff. In language anyone can understand–it’s a cartoon, after all–she argues that a global cap-and-trade system to regulate greenhouse gases, which is what the upcoming Copenhagen climate talks are all about, won’t solve the problem of global warming.

She makes great points. Among them:

Giving away the permits to pollute under a cap-and-trade system is inequitable. As she puts it:

Industrial polluters will get the vast majo of these valuable permits for free. Free! The more they are polluting, they more they get. It’s like we’re thanking them for creating this problem in the first place.

The U.S. has a moral obligation to help poor countries which didn’t, after all, create the global-warming mess we’re in. As she says:

Don’t we have a responsibility to help those most harmed? It’s like we had a big party, didn’t invite our neighbors and then stuck them with the cleanup bill. It’s just not cool.

Carbon offsets are a risky business. She worries:

The danger with offsets is that it’s very hard to guarantee that real carbon is being removed to create the permit, yet these permits are worth real money, This creates a very dangerous incentive to create false offsets—to cheat. Now in some cases cheating isn’t the end of the world. In this case, it is.

Her solution? Cap emissions, let EPA regulate them, tax carbon, use the money for clean energy or to help poor countries adapt or mitigate their emissions.

In an ideal world, maybe. Her solution isn’t as simple as it sounds. Any effort by EPA to regulate emissions could be tied up in the courts for years.

In today’s world, forget it. As David Roberts points out in his acerbic critique-of-the-critique in Grist, the problems with cap-and-trade legislation as it is now written are a direct result of the power of the fossil fuel lobby. When Big Coal and Big Oil go toe-to-toe with Big Green, industry wins.

The fundamental problem we’re facing is that the environmental movement–even at its most mainstream– doesn’t have the clout to get a truly strong climate bill enacted. Getting even the current watered-down version enacted will be tough. Indeed,  inside-the-Beltway BINGOs (big NGOS) worry so much about losing supporters  that they are reluctant to engage in an honest conversation about climate change: That is, one that says we will likely have to sacrifice now–by paying higher prices for energy, subsidizing renewable power, and sharing clean tech with poor countries–to save the planet for future generations.  Instead, they chant the mantra of “green jobs.”

One more thing to note about this video: Leonard says carbon trading will be run by the likes of Goldman Sachs and Enron, the people who gave us the dot-com bubble and the subprime mortgage crisis. (Somehow Bernie Madoff’s name comes up as well.) She doesn’t like markets or big business, clearly.

This isn’t an argument. It’s name-calling.

But because some people in corporate America have screwed up so badly lately, it is, unfortunately, effective name-calling.

That’s a problem for those of us who still believe that well-regulated markets–including a carbon market–can be part of the solution to global warming.

Your thoughts?

UPDATE: I rushed this blogpost into “print” yesterday because Annie Leonard’s video was sweeping through the green blogosphere and I was eager to join the conversation. In retrospect, I wouldn’t call her critique “devastating” in the headline. “Pointed” or “hard-hitting” would be better.

What’s more, while Leonard effectively highlights the flaws of cap-and-trade, the policy debate around whether it will work, whether it has worked in Europe, who will benefit, whether a carbon tax would be better, why offsets are essential to any cap-and-trade scheme (or not) is obviously much more complicated than any 10-minute video or 800-word blogposting can capture. (See the comments to David Roberts’ post if you like, for a useful discussion of these issues, with numerous links.) For what it’s worth, I believe cap-and-trade can be made to work despite its dizzying complexity and the risks of gaming the system–although I’d prefer to see a cap-and-dividend approach where the proceeds from auctioning permits are returned to consumers or even a revenue-neutral carbon tax.


  1. Tyler says

    I’m a little confused exactly as to what your argument against the video is? Is it basically that cap and trade is the best we’ll get and we’ll have to settle for it?

    Another question: Why does there have to be middle men pocketing money. Why can’t a business sell a permit directly?

  2. says

    Senator Gillibrand recently touted carbon trading to rescue Wall St. (Wall St Journal, Oct 21). It’s hardly name-calling to point out that they’re poised to game and profit grotesquely from a carbon market.

    – James Handley
    Carbon Tax Center

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