Climate change legislation is coming. Like it or not, there is sufficient political consensus that global warming needs to be addressed nationally and that — barring some kind of major screw-up by proponents — we will certainly see legislation aimed at substantially reducing carbon emissions this year.
On the national level, President Obama has put a cap-and-trade system into his proposed budget. In the event his proposal doesn’t make it through Congress, Gov. Doyle has been meeting with a group of governors to come up with a regional cap-and-trade system for the
The problem with these efforts lies not in their attempts to reverse the recent trend of accelerating growth of carbon emissions but rather in the idea that a cap-and-trade system is the best solution. A cap-and-trade system is fundamentally a component of a centrally planned economy. While allowing companies to purchase carbon credits at auction — and buy and trade them like stocks — calls to mind some principles of the free market, as long as the government is determining the level of total carbon emissions, it is no more than a concession that government bureaucrats can manage our economy down to the last molecule of carbon dioxide.
Despite that pro-free market forces have lost considerable credibility over the last several months, with very few exceptions, most people just want a more regulated free market system with more government intervention as opposed to a truly centrally planned economy. For example, despite wanting bailouts and increased emissions standards for the auto industry, no one is seriously proposing the government decide how many of each kind of car our automakers ought to produce.
Having a free market-based system, even with heavy government taxation, regulation and intervention is still remarkably different than a fundamentally centrally planned economy. That’s why European-style socialism has enjoyed relative success and provided reasonable economic growth, while Soviet-style communism collapsed and wrecked so many economies. It’s also why, despite having a social safety net that would make many Progressive Dane members giddy and the highest rate of taxation in the world, a country like
Allowing the government to set the “optimal” levels of carbon emissions is no less absurd than allowing them to decide the proper number of cars or computers. There is no possible way for anyone to be able to determine the appropriate total level of carbon emissions for our economy. And given how terrible everyone — including the government and the private sector — has been at predicting the economic consequences of actions recently, can you really trust anyone who claims that proper management of the cap-and-trade system won’t have dramatic economic consequences? That’s one risk I would rather not take.
Letting government officials decide what they believe to be the appropriate levels of carbon emission would have adverse effects if inappropriately determined. If the allowable level of total carbon emissions is set too low, we risk making energy prohibitively expensive and stifling all of our bleak hopes at economic recovery. On the flip side, setting the limit too high would unnecessarily allow emissions to continue at higher levels and render the program ineffective at reducing greenhouse gases.
However, there is a way we can regulate carbon emissions that reflects the proven system of the free market with a touch of government regulation and intervention as opposed to the failed idea of a centrally planned economy. If carbon emissions really need to decreased, the best way to do it would be with a carbon tax. Internalizing the added costs to society of carbon emissions through a tax would avoid the rigid central planning of the cap-and-trade system while still providing substantial encouragement for the reduction of carbon emissions. With a carbon tax, the market would have the flexibility to determine what the optimal level of carbon emissions ought to be given the economic climate.
In a world where government bureaucrats manage the cap-and-trade system perfectly, the cost of acquiring carbon permits would remain relatively stable, enough to encourage us to move away from carbon-based fuels but not high enough to severely hamper economic growth. The two systems function very similarly in how they reduce carbon emissions, therefore, it just makes sense to just eliminate the potential for incorrect decisions by our well-intentioned government officials through a carbon tax. Our economic and environmental futures may depend on it.
Patrick McEwen ([email protected]) is a sophomore majoring in nuclear engineering.