The Heritage Foundation - Leadership for America

Laurie Williams and Allan Zabel, two lawyers currently working at the Environmental Protection Agency (EPA), spoke out against cap and trade in their Washington Post column. Zabel has first hand experience with cap and trade, overseeing California’s cap and trade and offsets programs. The article is full of good reasons why a cap and trade program to reduce greenhouse gas emissions is a bad idea. They also highlight how it differs substantially from the acid rain cap and trade plan, which proponents  tout as a reason to cap and trade CO2:

Cap-and-trade means a declining “cap” on total emissions, while allowing trading of pollution permits. Confidence in the certainty of declining caps is based on the mistaken assumption that cap-and trade was proven in the EPA’s acid rain program. In fact, addressing acid rain required relatively minor modifications to coal-fired power plants. Reductions were accomplished primarily by a fuel switch to readily available, affordable, low-sulfur coal, along with some additional scrubbing. In contrast, the issues presented by climate change cannot be solved by tweaks to facilities; it requires an energy revolution through investments in building clean-energy facilities.”

The authors explain, however, that these minor modifications and cheap alternatives aren’t available when it comes to America’s energy use:

The biggest obstacle to this revolution is that uncontrolled fossil fuel energy remains much cheaper than clean energy. Cap-and-trade alone will not create confidence that clean energy will become profitable within a known time frame and so will not ignite the huge shift in investment needed to begin the clean-energy revolution. In recent interviews, even the economists who thought up cap-and-trade have said they don’t believe it’s an appropriate tool for climate change.”

The brunt of the authors’ objection to a cap and trade system has to with the offset provision. If a coal plant believes it’s cheaper not to reduce its carbon footprint, it can pay someone else to do so. For instance, a company could pay a logger not to cut down trees, or they could pay someone to grow trees since trees absorb carbon. Or a developing country can build a cleaner coal plant saying they were going to build a dirtier one while cashing a check from a developed country for the alleged carbon offset. Williams and Zabel make the same case with the forest owner:

[I]f the landowner wasn’t planning to cut his forest, he just received a bonus for doing what he would have done anyway. Even if he was planning to cut his forest and doesn’t, demand for wood isn’t reduced. A different forest will be cut. Either way, there is no net reduction in production of greenhouse gases. The result of this carbon “offset” is not a decrease but an increase — coal burning above the cap at the power plant.”

And the offset program creates perverse incentives and unintended consequences:

[C]onsider the refrigerant HCFC-22, the manufacture of which creates an extremely powerful greenhouse gas as a byproduct. This byproduct is relatively easy and cheap to destroy, and governments could require refrigerant manufacturers to do just that. But offset investors have persuaded regulators to approve destruction of the byproduct as a carbon offset, making it twice as profitable to sell byproduct destruction as it was to sell the refrigerant.”

Designed to be a cost containment measure, experience with offsets have led to nothing but fraud with no reduction in carbon dioxide. The architects of cap and trade legislation claim that farmers and landowners with forestland to be the big winners from the offset program. But the economic pain they suffer, along with everyone else, will be much greater than any offset check they collect.