Rachel's Democracy & Health News, June 5, 2008


[Rachel's introduction: "Leading environmentalists" in the U.S. are urging Congress to try to curb global warming by creating a massive public-private bureaucracy to trade pollution permits amongst polluters, instead of simply taxing unwanted emissions.]

By Peter Montague

This week the U.S. Senate -- arguably the most powerful 100 people on the planet -- began a debate on a bill to curb global warming.

The N.Y. Times wrote June 3, "The debate, which could last all week, will force senators to take a stand on some of the most difficult, expensive and potentially life-altering questions the world will face in coming decades."

In an editorial May 28, the New York Times had summarized the issue this way: "The scientific case for action, strong five years ago, is even more persuasive now. Authoritative assessments from the Intergovernmental Panel on Climate Change, among other studies, have left little doubt that the world is heating up, that man-made emissions are largely responsible and that swift action is necessary to avoid widespread environmental damage."

The bill being debated in the Senate is known as Lieberman-Warner. It is being promoted aggressively by Democrat Barbara Boxer. The bill is co-sponsored by John McCain, Hillary Clinton and Barack Obama. According to the Times June 2, the details of the bill were crafted by a coalition of "some of the most powerful corporate leaders in America [who] have been meeting regularly with leading environmental groups in a conference room in downtown Washington for over two years..."

So this is a bill written by our "leading environmentalists." The only "leading environmentalists" named by the Times are staff of the Natural Resources Defense Council, but we know Environmental Defense has had a heavy hand in this, too.

The bill would create an enormous new public/private bureaucracy to curb the emission of global warming gases, chiefly carbon dioxide (CO2). The system is called "cap and trade." The basic intent is not a bad one -- to put a price on carbon, which is currently being dumped into the atmosphere for free.

There are two basic ways to put a price on carbon -- simply tax it, or wrap it in a large bureaucracy devoted to "cap and trade."

The "cap and trade" idea is to force carbon dioxide (CO2) emitters to purchase pollution permits, each of which is a legally-enforceable right to pollute the atmosphere with CO2 -- but only up to a certain level (the "cap"). If polluters reduce their emissions below their permitted level, they can sell their unused permits to other polluters (the "trade"). Every once in a while the total "cap" gets lowered by the iron hand of government (at least in theory) and the "trade" part supposedly allows for super-efficient reductions in CO2 emissions: Those who can reduce their emissions cheaply will do so, and those who can't will buy extra pollution permits in the open market (thus worsening pollution in some unfortunate communities, relative to more fortunate communities). Advocates of "cap and trade" say such a system will minimize the overall cost to the polluters while ratcheting down CO2 emissions rapidly enough to avert climate chaos. At least that's the theory. (It is worth noting that the costs of pollution in the unfortunate communities [asthma, pulmonary disease, cancer, school days lost, emergency room visits, etc.] are kept "off the books" in all these "efficiency" calculations. To some "leading environmentalists" and their corporate-polluter partners, unfortunate communities have a value of zero.)

You won't read about it in the New York Times, but there are serious mainstream critics of the "cap and trade" approach who say it is neither economically efficient nor workable. For example, the Congressional Budget Office (CBO) -- Congress's own office of economic analysis -- published its study three months ago concluding that:

** A carbon tax -- not cap and trade -- is the "most efficient" method to address global warming, both in limiting economic costs and for achieving environmental benefits.

What is a carbon tax?

A carbon tax is a tried-and-true way of putting a price on carbon emissions. Such a tax can be remarkably simple: you weigh the amount of carbon-containing fuel (coal, oil, or natural gas) as it comes out of the ground (or as it is comes off the ship), calculate the tax per ton of carbon, and collect the tax. End of story. The cost of the tax gets passed along to the purchaser via the market. Or, with considerably more effort, you could tax carbon directly at the point of purchase. Either way, you don't have to measure anyone's emissions -- an exceedingly complex and costly procedure providing untold opportunities for thousands of polluters to fudge the data. The tax has an additional advantage: no one gains a legally enforceable "right to pollute." With a tax, the nation's electric utilities -- and cement, aluminum and steel companies -- wouldn't ever be able to go to court to try to stop government from taking away their "right to pollute," a property right they could claim to own because they purchased it with good money.

On its face, a cap and trade program is immensely complex. As Robert Samuelson writes in the June 9 issue of Newsweek, "The chief political virtue of cap-and-trade -- a hugely complex scheme to reduce greenhouse gases -- is its very complexity." Within all the complexity comes endless opportunity for shenanigans. (The BBC reported this week how the carbon trading scheme built into the Kyoto Treaty is being gamed by polluters at considerable profit to themselves but no benefit to planet Earth.)

In a cap and trade program, someone has to sell or auction (or give away free) the pollution permits each year. Someone else has to keep track of who has received how many permits and who has sold how many of their permits to whom. (Permits can be "banked" and used years later, so someone must pay close attention.) Someone else has to measure all the tens of thousands of permitted CO2 emissions to make sure they aren't exceeding permitted levels. Buying and selling rights to pollute will create an enormous private bureaucracy -- a trading exchange -- supported by an army of bankers, lawyers, engineers, accountants, analysts, ad men, publicists, lobbyists, sales people, hucksters and camp followers. The first year of a "cap and trade" program is estimated to create a new "market" in pollution rights worth a $220 billion. A market worth $220 billion per year is as large as the market for computer processors. There's real money to be made here by the clever and the unscrupulous. The British journal New Scientist reported in April that "what began as a niche market is now attracting major financial institutions such as Morgan Stanley, Credit Suisse, and Barclays Capital..." plus JP Morgan Chase and others. In other words, the new carbon market is being created by the same people who created the ever-deepening mortgage lending disaster. Have they shown that they have society's best interests at heart, or have they shown a cruel focus on making money, no matter the cost to others? It's a fair question.

New Scientist summarized the root question this way: "As Nicholas Stern, former chief economist at the World Bank, puts it: climate change is 'the greatest market failure the world has ever seen.' The question now is whether capitalism is able to make amends. Can it provide a mechanism that rewards people for reducing their carbon emissions instead of increasing them? Or will it simply give big polluters a way of dodging their responsibilities?"

And New Scientist ends its devastating critique of "cap and trade" with a stark warning about the consequences of manipulation and deception within the carbon trading market: "With Enron, it was the shareholders who suffered. But if the atmosphere continues to be filled with greenhouse gases and the planet's climate crashes as Enron did, no one will be spared."

On May 4th, two attorneys working for U.S. Environmental Protection Agency [EPA] wrote an "open letter to Congress" explaining why "cap and trade" can't work. Attorneys Laurie Williams and Allan Zabel each have roughly two decades of experience in environmental enforcement, and Zabel has extensive experience with prior cap and trade programs run by EPA. Williams and Zabel told Congress that a "cap and trade" system "is an open invitation to fraud and would significantly delay reductions [in carbon emissions]." They went on to list (and document) half a dozen other reasons why a "cap and trade" program will be nothing more than a gift to the financial industry and the polluters but will not reduce CO2 emissions quickly enough to avert climate chaos.

So the U.S. Senate is debating how to curb global warming, but is restricting the debate to a single approach -- "cap and trade" -- an approach that was devised by the corporate polluters themselves, locked in a room for two years with their house environmentalists.

"Cap and trade" sets up a system that offers endless opportunities to game the system and make even more money by burning fossil fuels, while claiming to be curbing global warming fast enough to avert climate chaos. By the time the system has matured and we learn that it did not work, the billionaires created by the system will be living comfortably in the globally-warmed mountains of Switzerland while the rest of us are learning to deal with more and bigger Katrinas, creeping inundation of all the world's coastal cities, and widespread famine from crop failures caused by drought.

This disaster is being created right before our eyes by the "leading environmentalists" in the United States. Pulitzer-prize winning journalist Ross Gelbspan reports in the Boston Globe that at least one leading environmental organization in the U.S. -- Environmental Defense -- is planning to make money brokering carbon trades. Let's point out for the record that many, many environmentalists in the U.S. oppose this dangerous, self-serving gamble with the future of the planet. Two collaborations of environmental justice advocates (originating on the East and West coasts of the U.S.) have taken unequivocal positions against carbon trading. Clearly, a national (and global) climate justice movement is emerging. Let's hope it gathers momentum in time to stop the "leading environmentalists" in the U.S. from creating an irreversible catastrophe.