Cap and trade a real solution for environmen
Sanjai Tripathi
Issue date: 4/21/09 Section: Forum
When it was first proposed, industry lobbyists and their politician allies of course claimed it would be unaffordable and impractical. They gave the public the most expensive cost estimates they could find, telling them the price of electricity would skyrocket. People were understandably scared.
In the end though, those estimates turned out to be wildly inflated. The SO2 cap-and-trade system slowly tamed the acid rain problem over time without notable harm to consumers.
This was possible because with a cap-and-trade system, rather than implementing any expensive solutions, the market seeks to reduce with a combination of what I call the "lowest-cost alternatives" on the supply side, and by cutting the "least valuable uses" on the demand side.
With a cap-and-trade system on your side, you have the whole free market seeking the cheapest solution. Rather than doing an expensive retrofit to put expensive scrubbers on an old coal plant, the market will discover that it's cheaper to put them on a new plant as it is being built, as that is the lower-cost alternative.
Similarly, rather than making painful cuts to our way of life, like turning off the heat in the winter, the market seeks the easiest ways to make cuts, like putting motion sensors on office lighting systems.
The sulfur dioxide cap-and-trade system was effective in reducing acid rain, and did so at the lowest possible cost to society.
Economically speaking, cap and trade is an elegant solution - realistic, precise, affordable and effective. It has already been successful at solving a difficult environmental problem.
Now we have another problem with a different kind of "dioxide": carbon dioxide. The problem is anthropogenic global warming (AGW).
Of course, some people don't think it is a real problem. To this, I would again point to the Wikipedia page "scientific opinion on climate change," where you can read how nearly every major scientific group with relevant expertise on the matter is telling us that climate change is real, it is very likely caused by human activity and that a real consensus exists among scientists on this matter.
In the end though, those estimates turned out to be wildly inflated. The SO2 cap-and-trade system slowly tamed the acid rain problem over time without notable harm to consumers.
This was possible because with a cap-and-trade system, rather than implementing any expensive solutions, the market seeks to reduce with a combination of what I call the "lowest-cost alternatives" on the supply side, and by cutting the "least valuable uses" on the demand side.
With a cap-and-trade system on your side, you have the whole free market seeking the cheapest solution. Rather than doing an expensive retrofit to put expensive scrubbers on an old coal plant, the market will discover that it's cheaper to put them on a new plant as it is being built, as that is the lower-cost alternative.
Similarly, rather than making painful cuts to our way of life, like turning off the heat in the winter, the market seeks the easiest ways to make cuts, like putting motion sensors on office lighting systems.
The sulfur dioxide cap-and-trade system was effective in reducing acid rain, and did so at the lowest possible cost to society.
Economically speaking, cap and trade is an elegant solution - realistic, precise, affordable and effective. It has already been successful at solving a difficult environmental problem.
Now we have another problem with a different kind of "dioxide": carbon dioxide. The problem is anthropogenic global warming (AGW).
Of course, some people don't think it is a real problem. To this, I would again point to the Wikipedia page "scientific opinion on climate change," where you can read how nearly every major scientific group with relevant expertise on the matter is telling us that climate change is real, it is very likely caused by human activity and that a real consensus exists among scientists on this matter.
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RJ
posted 4/21/09 @ 7:55 AM PST
Sanjai - we will do cap and trade when all the other countries do, specifically China and India. There is no way our companies can be competitive with those of China and India if they are paying more for energy costs. (Continued…)
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