Posted by Jim Lindgren:
Would Cap-And-Trade Work Here or Would it Fail as in Europe?
http://volokh.com/archives/archive_2009_06_07-2009_06_13.shtml#1244518286
Sean Higgins warns us of the [1]failure of Europe's cap-and-trade
regime:
The major cap-and-trade bill now working its way through Congress
is not without precedent. The European Union has had a cap-and-
trade regime in place for years. It just hasn't worked so far.
Begun in 2005, the EU's Emissions Trading Scheme has raised energy
prices with "uncertain" effects on greenhouse gas emissions,
according to numerous studies.
Even green groups have been critical. The Natural Resources Defense
Council, for example, has called ETS "an example of what not to
do."
This failure has not daunted fans of Congress' cap-and-trade bill.
They claim to have learned from the earlier mistakes.
"Those lessons have resulted in a pretty significant change in the
way the U.S. system is being designed," said Sierra Club lobbyist
John Coequyt, who calls Europe's program "ineffectual."
Carbon Copy?
Critics like Myron Ebell, a climate policy analyst for the
free-market Competitive Enterprise Institute, see no reason to be
that optimistic. He notes that the main problem with ETS was the
giving away of the program's carbon allowances.
"Congressman Jay Inslee (D-Wash.) said we're not going to make the
same mistake here," Ebell noted. "But as soon as it became apparent
they didn't have the votes without big-business support, they
started giving away all of the credits."
Indeed, the current bill began as a 100% auction of permits to emit
greenhouse gases. It now would give away 85% of the permits to
businesses, utilities and the like. . . .
Under the programs, carbon permits are either given away or
auctioned off, with the government making fewer available each
year.
A business with more permits than it needs can sell them to others,
creating a market in carbon. As the permits become scarcer, firms
therefore have financial incentives to reduce their emissions.
Euro Trash
That is how it works in theory. But it hasn't worked out that way
in Europe, according to a study last year by the Government
Accounting Office. The GAO is the nonpartisan fact-finding arm of
Congress.
"The (ETS) program's effects on emissions are uncertain and its
impact on sustainable development has been limited," the GAO said.
Individual EU nations tried to protect their local industries and
ended up issuing more permits than there was total carbon output.
In short, the permits never became scarce.
"In 2006, a release of emissions data revealed that the supply of
allowances -- the cap -- exceeded the demand, and the allowance
price collapsed," the GAO found. The EU told the GAO that it could
not be certain ETS resulted in any reduction of emissions.
The price of permits fell from about 30 euros per ton of carbon
dioxide in April 2006 to 0.1 euro in September 2007.
The collapse in carbon permit prices gave the EU industries little
reason to innovate. The GAO found that there had been "no serious
degree of private sector investment in cleaner technologies." . . .
Emissions did fall 3% in 2008, but experts on both sides agree that
that was largely due to the recession, which has reduced industrial
output and energy usage.
Meanwhile, energy prices for end users have risen sharply. From
2004 to 2007, household energy costs rose by 16% on average in the
25 EU countries and industrial rates rose by 32%, according to the
European Commission.
References
1. http://news.yahoo.com/s/ibd/20090608/bs_ibd_ibd/20090608general
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