<<  <  >  >>

Positive economic

Emissions Trading: The Great Escape?

tions. With most developing countries cur-

It is an open secret that remixing energy

rently unwilling to join such a trading

and environmen-

supply and reducing net energy use are not

regime, the benefits of emissions trading

tal trends suggest

capable of meeting America's obligation

will be greatly attenuated.

that fossil fuels

under the Kyoto Protocol, short of politi-

cally intolerable economic hardship. That is

Free-Market "No Regrets" Policies

will be increasing-

why the Clinton administration is counting

Fossil fuels are compatible with environ-

ly sustainable in

heavily on "effective international trading"

mental quality and otherwise "sustainable"

of CO emission permits.2 4 3 Such trading in

for several reasons. First, the science is much

the 21st century.

2

the Clinton administration's estimate is

more settled with respect to the benefits of

responsible for lowering the cost of compli-

higher atmospheric levels of CO for plant

2

ance as much as 80 percent to 85 percent.2 4 4

growth and food supply than it is with

The use of a 1990 baseline in the Kyoto

respect to the ecological harms from man-

Protocol creates a large pool of emissions

caused climate change. Second, a moderately

credits for Russia, Germany, and other coun-

warmer and wetter world is economically and

tries that have reduced emissions for reasons

environmentally better. Third, robust energy

unrelated to climate change policy. American

markets and economic growth would sub-

industry could purchase "cheap" Russian

stantially eradicate "poverty pollution."2 4 7

emission credits to avoid more costly mea-

Bringing hundreds of millions of individuals

sures, such as internal emissions reductions.

into the modern world with electricity and

So the emission reductions that Russia

transportation energy is not an "unsustain-

might not have used itself for many years

able" extension of the fossil-fuel age but a

allow present emissions--though at some

prerequisite to improving living standards so

cost compared with there being no trading

those people can afford a better environment.

requirement at all. That is why a number of

Substituting affordable, sophisticated fossil

mainstream environmental groups, the

energy for the burning wood or dung indoors

European Union, and environmental minis-

to heat, cook, and light is essential to this

ters of the G-8 industrialized nations have

end.2 4 8For today's several billion mature ener-

raised the concern that emissions trading

gy users, on the other hand, energy upgrades

would promote business as usual instead of

of appliances and fuel inputs will improve

substantial emissions reductions in the

mobility, convenience, and comfort just as

United States in the first (and probably the

they have in the past. Increasing energy

easiest) budget period, 2008­12.2 4 5

affordability will also promote universal

water desalinization, irrigating ("greening")

Emissions trading can be described as

massive areas of barren desert, and develop-

"market conforming" and "efficient" to the

ment and implementation of electrotech-

extent that the lowest cost emission reduc-

nologies that improve the environment in

tions can be discovered, as opposed to a

many subtle ways.2 4 9

mandated facility-specific approach, under

which particular firms must rigidly reduce

The greater the cost and improbability of

emissions. But such a program assumes

success of a proposed course of action, the

that the transaction costs (monitoring and

more compelling is a public policy of wealth

enforcement costs) of an international pro-

creation in an energy-rich economy. Violating

gram with more than 160 sovereign nations

market preferences by mandating inferior

(and the enforcement weapon of interna-

energies and forcing energy conservation

tional trade restrictions) do not sabotage

(energy rationing) reduces the wealth and

the economic gains of the program.2 4 6

societal resiliency that may be needed to

adapt to whatever uncertainties the future

Moreover, an international trading regime

holds and to deal with major social problems,

must include a large pool of developing

including the possible negative effects of cli-

nations to secure low-cost emissions reduc-

38