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What the US Can Learn From Europe's Pollution Credit System 425

Al writes "Technology Review discusses what a US carbon trading scheme could learn from the flawed European experience. Advocates of carbon-trading schemes like to point to Europe's cap-and-trade program as a model worthy of emulation, but the reality has been less than perfect. A glut of pollution credits, distributed without cost during both the first, transitional phase of the program and the current working phase, drove down the value of the EUAs. As a result, Europe's carbon dioxide emissions remain priced well below 20 euros per ton. With the price of pollution so low, economists say, industries that generate and consume energy have no incentives to change their habits; it is still cheaper to use fossil fuels than to switch to technologies that pollute less. Establishing a carbon price in the US system now, and tightening the system later, could send a dangerously wrong signal to financial markets looking to invest in new energy technologies."
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What the US Can Learn From Europe's Pollution Credit System

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  • by DriedClexler ( 814907 ) on Wednesday July 01, 2009 @04:32PM (#28548987)

    So pay a uniform "pre-bate" [1]to everyone equal to the "energy tax" they would pay if their income were x% of the poverty level. (Again, that's a uniform prebate to all adults, with no means-testing.)

    Then, the only people whose *net* taxes go up are the ones making above the poverty level and don't reduce energy use. And the poor's taxes (by whatever definition you use for x) don't change. And it retains the incentive for everyone, including the poor, to cut back whatever energy consumption they can.

    [1] For those of you with low intelligence or born before 1960, read that as "Mail a check".

  • breathing tax? (Score:2, Interesting)

    by TimSSG ( 1068536 ) on Wednesday July 01, 2009 @04:35PM (#28549045)
    Any Idea how they are going to tax breathing?
    I know they have not said they are going to do it; but, see option 3 I think the Libs will like it.
    The way I see are
    1. Flat rate per person
    2. Prorated based on the weight of person
    3. Just tax the calories in food.
    (Carbon production in people is closely related to calorie intake)
    Tim S
  • by Anonymous Coward on Wednesday July 01, 2009 @04:37PM (#28549083)

    This is only dealing with the symptoms, just like any other environmental protection scheme.

    There is only ONE environmental problem, which is the root cause for all other environmental issues. Solve that problem and all others will automatically disappear.
    That problem is overpopulation. massive overpopulation.

    Please go on ignoring the problem while jumping to the conclusion I want to kill 95% of the population, probably applying some eugenics on the way, and mod me -1, Nazi .

  • Re:Yeah, funny that. (Score:3, Interesting)

    by geoffrobinson ( 109879 ) on Wednesday July 01, 2009 @04:47PM (#28549293) Homepage

    And there is plenty of disagreement that there are much negative externalities about carbon dioxide. Besides that, what you say makes sense.

    The other problem is determining how much negative externalities actually exist for carbon dioxide if we assume they do exist.

  • by chicago_scott ( 458445 ) on Wednesday July 01, 2009 @04:48PM (#28549313) Journal

    Matt Taibbi, in his article The Great American Bubble Machine, asserts that the next bubble will be the carbon trading scheme. Perhaps that's how the Government and Wall Street plan on keeping carbon credits artificially high. That is until the bubble bursts and they raid our tax dollar barrel... again. []

    The new carbon-credit market is a virtual repeat of the commodities-market casino that's been kind to Goldman, except it has one delicious new wrinkle: If the plan goes forward as expected, the rise in prices will be government-mandated. Goldman won't even have to rig the game. It will be rigged in advance.

    Here's how it works: If the bill passes; there will be limits for coal plants, utilities, natural-gas distributors and numerous other industries on the amount of carbon emissions (a.k.a. greenhouse gases) they can produce per year. If the companies go over their allotment, they will be able to buy "allocations" or credits from other companies that have managed to produce fewer emissions. President Obama conservatively estimates that about $646 billions worth of carbon credits will be auctioned in the first seven years; one of his top economic aides speculates that the real number might be twice or even three times that amount.

    The feature of this plan that has special appeal to speculators is that the "cap" on carbon will be continually lowered by the government, which means that carbon credits will become more and more scarce with each passing year. Which means that this is a brand-new commodities market where the main commodity to be traded is guaranteed to rise in price over time. The volume of this new market will be upwards of a trillion dollars annually; for comparison's sake, the annual combined revenues of an electricity suppliers in the U.S. total $320 billion.

    Goldman wants this bill.

  • by 140Mandak262Jamuna ( 970587 ) on Wednesday July 01, 2009 @04:48PM (#28549323) Journal
    Why complicate the process? It is a tax, call it one and make it one in a straightforward sense. Tax coal at some rate, imported petroleum at some other rate and exempt wind and solar energies. Simple. right?
  • by pilgrim23 ( 716938 ) on Wednesday July 01, 2009 @04:49PM (#28549353)
    Actually, you are quite right. pity I have no points to mod you up. Nuke Energy is indeed the best bet. Wind? when do you need energy to run the air conditioner? When it is hot and still. Hydro? but that hurts the fishes; Tear out the dams!. Other renewable? Show me one ONE ton of steel smelted by "Green" fuel. over the last 200 years, the winner of every conflict has been the country with the greatest production of steel by ton. Yes I know Nuke is evil (TM) but it is the only green tech we currently have. Yes Green. Of course, Alternately, you could learn Mandarin to speak for better treatment from your masters. mucking manure in a rice farm is after all an eco- paradise...
  • Re:Huh? (Score:3, Interesting)

    by ruin20 ( 1242396 ) on Wednesday July 01, 2009 @05:12PM (#28549795)
    no we don't have one. the reason why it's been defeated every time is that the proponents of the bill (typically California, Washington, Arizona, Nevada) receive a large portion of their power from hydroelectric power. So they have renewable sources available. Essentially this is a tax on the breadbasket states who have less clean resources available to them, and who's economies are based more on industry then the states on the coasts. It's been proposed several times, and several times defeated. Cap and trade makes sense if alternatives are more evenly distributed, but unfortunately they're not.
  • by DriedClexler ( 814907 ) on Wednesday July 01, 2009 @05:19PM (#28549937)

    It would work fine if the tax were progressive, but if the assumption is that the burden on a poor person is the same as the burden on a rich person, then "prebating" enough that the poor guy's net tax is 0 means everyone's net tax is 0.

    Not sure I understand. My solution was just prebating energy taxes, and I mean the net tax *change* is zero, and if you base it on poverty level energy spending, that makes it progressive. Because you net change in taxes (if they go up) is equal to the tax you pay on each unit of energy you consume *above* the poverty level energy consumption.

    In other words, if E is the cost of the energy concent of goods you consume, and t is the effective tax on energy, and P is the poverty level spending on energy, and R is the Rebate, your net change in taxes is:

    E*t - P*t

    or, t*(E-P).

    1) How will you calculate the amount of this "prebate"? Will it be figured "per man woman or child" in line with the article's assumptions? How much per? How will ou even begin to estimate this?

    Yes, great concerns, all, but you're changing the topic. The original concern was "but this will hurt the poor". Fine. There are trivial ways to remove this unpleasant aspect without fundamentally changing the plan or its incentives on any marginal unit of fossil fuels. I just explained how.

    2) How will you fund the "prebate"?

    From the auction revenues.

  • by Chas ( 5144 ) on Wednesday July 01, 2009 @05:22PM (#28549975) Homepage Journal

    SCHEME skeem

    an underhand plot; intrigue

  • Carbon Pollution? (Score:1, Interesting)

    by Anonymous Coward on Wednesday July 01, 2009 @06:11PM (#28550717)

    You obviously think CO2 is a pollutant the same as in the summary, otherwise you would not be ranting so. So you must agree that it must be eliminated. All of it because you can't leave just a little pollution around, why would that be good?

    Did you know that if you eliminated all of your CO2 pollution, all higher forms of life on Earth would cease? Yes, you heard right. CO2 is essential for life on Earth. Without it, all green plants will die. That will be followed quickly by all animals, birds, and fish.

    So, do you still think CO2 is a pollutant?

  • Pollution (Score:2, Interesting)

    by slowgreenturtle ( 1529437 ) on Wednesday July 01, 2009 @06:25PM (#28550921)
    If there's so much pollution and it's killing us all, why are we living so much longer now then we were at the beginning of the 20th century? How about if you just leave me alone to make my own choices and stop 'taxing' me for living? Don't I have a right to my own life, to be decided as I see fit? The argument over how make to taxing people and companies 'simpler' seems like a smoke screen.
  • by demachina ( 71715 ) on Wednesday July 01, 2009 @06:52PM (#28551263)

    Its open to debate how much "harm" climate change has caused. There is anecdotal evidence it is harming coral reefs, and stressing polar bears. Climate change and green house gases are probably causing harm and will probably cause more in the future but we are relatively ignorant about our climate or what the actual results will be in the long run. Last article I read on coral reef problems indicated they are extremely complex ecosystems and we really don't have a very good insight in to what is causing their plight.

    The rate of change in our climate, which certainly might be green house gas related, is probably bad because when climate changes so fast it makes it hard for animal and plant life to adapt.

    But.... no where is it written in stone that the climate we had before the industrial age is the climate we have to lock in, in perpetuity. The Earth's climate has always changed and changed dramatically. The climate we had was one that was from exiting a recent ice age. The fact that large swaths of the planet are cloaked in ice and largely uninhabitable is kind of clue maybe our climate was a little on the cold side.

    It could be argued that by releasing CO2 trapped in vegetation from eras when the world was much warmer and more tropical we are just going to return a more normal climate from prior to the last ice age. People in cold northern and southern climes might actually LIKE the change. I recall Midwestern winters are some number of degrees warmer than they used to be thirty years ago and if you ever lived through a classic bone chilling Midwestern winter most Midwesterners would probably say that change is positive.

    We certainly run the risk of more hurricanes and more violent weather, but I don't think its a given that any of the climate "simulations" being touted by climate change chicken littles are even close to being accurate. Predictions there are going to be massive droughts and desertification could ultimately prove to be completely wrong. As oceans warm they could just as easily lead to dramatic increases in precipitation and return deserts like the Sahara to being verdant and abundant with life. More CO2 in the air will almost certainly improve plant growth. I'm no expert but its my guess that when the Earth has had previous peak green house periods it probably adapted with lush tropical jungles which thrived on the CO2 and proceeded to trap it in coal beds, cooling the planet. Of course with man intervening in the natural cycles we might tip the cycle in to a run away green house effect and destroy all life on Earth.

    I lean to the belief it is probably better if we reduce the rate at which we are dumping green house gases in to the atmosphere, because the rate of climate change will probably be too rapid for most life forms, especially the Homo Sapiens who foolishly have half their species located in low lying coastal areas often in habitats that can't easily be moved.

    On the other hand I haven't got much use for all the people who claim to know exactly what is happening now, why it is happening and what will happen ten, fifty or a hundred years from now and claim to know that it is all BAD. Truth is we unfortunately have very little insight in to how our climate works or where it will be in five years, let alone a hundred. We should proceed with caution. Green house gas pollution is probably bad, but you should take the, sky is falling, Chicken Little crowd with a grain of salt. Even if you accept we must urgently prevent rapid climate change, you should also stop kidding yourself any legislation coming out of bodies as worthless as the EU or the U.S. Congress is going to solve the problem:

    A. Both EU and U.S. cap and trade bills are full of holes. As this submission suggests they had to pander to so many special interests to get them passed they probably aren't going to be effective. The recent House cap and trade had to be gutted to get coal state and farm state congressmen to support it so it hands out so many offsets it debatable if it wil

  • by demachina ( 71715 ) on Wednesday July 01, 2009 @07:21PM (#28551601)

    If anyone is really worried about spiking oil and gasoline prices you should be a lot more worried about the role speculators are playing in the commodities markets than any effect cap and trade will have. Rolling Stone has an excellent exposé [] on the role Goldman Sachs in particular played in running oil prices up to $147 a barrel. Its a must read if you want to understand how Wall Street screws the rest of us to take home their multimillion dollar pay checks. This link is a scan, Rolling Stone doesn't have an online version. It is Rolling Stone so isn't exactly a pillar in the financial news industry, though the pillars probably wont rat out Goldman, and they are rats.

    The reason for the recent oil spikes really has nothing to do with supply and demand or cap and trade. The real causes were:

    A. Goldman Sachs and a dozen or so other big speculators got secret letters years ago exempting them from commodities regulations dating back to the 1930's which were designed to prevent speculators from driving up commodities prices.

    B. Large amounts of money were fleeing the housing bubble bursh, and resulting stock market crash, also caused in large part by Goldman Sachs. Goldman was packaging a lot of the toxic mortgages and then buying credit default swaps shorting their own mortgage bundles because they knew they were garbage. Most were with AIG so when the mortgage bundles turned to crap AIG went bankrupt, U.S. taxpayer gave them a $130 billion dollars and much of it wen out the back door in to Goldman's pocket (like $10 billion). Most of this was engineered by Paulson and the new head of AIG, both former Goldman Sachs executives. It was... criminal.

    C. Speculators poured in to oil and food futures with the help of entites like J Aron, Goldman's secretive commodity trader. Oil futures traded hands 20-30 times and were inflated beyond all reason, there was and still is a glut of oil was being parked all over the globe. They just moved the housing bubble to a commodities bubble. This bubble caused the oil price spike and food price spikes that caused $4 gas in the U.S. and food riots and starvation in the third world.

    Goldman Sachs has acquired such massive control over our government and financial system thanks to alumni like Paulson and Rubin. They have completely gutted financial regulation and turned all global markets in to rigged casinos where they always win and the rest of us always lose. It appears Summers is the new White House insider protecting Goldman's interests. Rubin in particular defeated every attempt to regulate credit default swaps. Paulson as Goldman CEO talked the government in to removing caps on leverage that enabled the recent bubble. A host of characters gutted regulation of the commodities market making commodity bubbles the new norm.

    A British Lord and financial type recently testified in front of an EU commission. His take was the big banks have managed to completely defang new attempts to regulate them in the wake of the recent crisis. They often threatened to just move off shore if the regulations got too onerous. He said they are RAPIDLY returning to business as usual prior to the recent collapse. They are returning to obscene compensation levels which is why they rushed to pay back all the TARP money. He predicted there will be another bubble and another major collapse in 10 to 15 years if it even takes that long.

    Moral hazard is a critical element in a Capitalist system. If you gamble big and lose you HAVE to know you will fail. Since the U.S. and E.U. governments bailed out all the most of the gamblers and saved most of them from any consequences at all for their misdeeds they will just repeat the cycle. They will gamble, they will pocket big profits, and when the bubble bursts tax payers, workers and consumers the world over will get to pick up the tab for the losses.

  • by falconwolf ( 725481 ) <<falconsoaring_2000> <at> <>> on Wednesday July 01, 2009 @09:25PM (#28552697)

    At the same time, to actually hurt the wealthy enough to change their habits, you would at the same time be hammering the workers because they have no option to reduce their pollution.

    Ah a plan like the Net Zero Gas Tax [] would help the poor. They'd pay more for fuel but pay less income tax. The way the plan is laid out the working poor would actually keep more of their paycheck and thus have more money. Those who then take steps to reduce their fuel use will end up with more money.


  • Re:Huh? (Score:4, Interesting)

    by ruin20 ( 1242396 ) on Thursday July 02, 2009 @12:26AM (#28553885)
    you can't just say "oh well then they'll be motivated to make an investment in solar and wind" and that will solve anything

    solar and wind are not blanket solutions. in places like North Dakota, a solar panel never repays the energy it takes to make it! it does nothing for the environment then! You can't put solar panels in Alaska where it's dark half the year round. And wind turbines might have problems in the winter.

    goes back to my point, it's HARD to implement those technologies in those states and with a cap and TRADE system clean states tend to benefit ALOT by selling excess credits to states in the bread basket. it's not about the environment. it's about one state with a ton of money trying to screw a bunch of other states who are less fortunate. It's one thing if they had alternatives, but wind and solar don't work everywhere.

    this plan takes money from the states that need the most development in terms of clean energy and gives it to the states that need it the least, which is a very inefficient way of doing things! Now the states not only have to pay a tax, but develop technologies that work with their climate, and do so with less resources then were available before the plan. my opinion? what will happen is they'll end up switching to bio fuels and drive the price of food way up, because they don't have other options. Then we all lose.

  • by sumdumass ( 711423 ) on Thursday July 02, 2009 @12:54AM (#28553977) Journal

    No, the fact is that the link between CO2 and global temp is a theory.

    so is relativity, gravitational theory, evolutionary theory etc. A theory in science does not constitute a wild guess.

    however well reasoned, it is still a guess. Not being a wild guess does not make it more then a guess.

    indeed, there's more to the theory of AGW than these facts, that's why people spend years of work doing research on the matter. National policy should be done in such a way as to both limit government involvement and follow the science; not one or the other. Unfortunately, the two sides have become so polarized and fervently supportive of an either or approach that it's unlikely to end well and both ends are outside the realm of sane policy.

    The polarization is something coming from the deep politicization of the idea. Global warming was hijacked early on by political positions attempting to use the "fear mongering" aspect of it to advance various political ideals. It's still being done today and will probably be a major point of tomorrow.

  • by sumdumass ( 711423 ) on Thursday July 02, 2009 @03:04AM (#28554671) Journal

    Whether a Cap & Trade scheme is progressive depends entirely on how you give out the emissions permits. Auction them off and rebate the proceeds to the taxpayer (even if it's a flat check to every American), you have an enormously progressive plan.** Give them away and you have a regressive plan.

    I don't follow your reasoning here. All costs are past on to the consumer so any costs assessed to businesses will most likely be passed onto the consumer. The only way it would be more likely to come from profit instead of being past on to the consumer is if only part of the industry is obligated to the tax, otherwise there is no competition requiring the costs to be absorbed.

    There would be no progressiveness there. And if everyone got a rebate, then costs getting passed on to the consumer would just negate any potential influences the tax would have because the consumer is compensated for the increased costs.

    Now if you want a progressive version, contact your member of Congress and tell them to support that. Unfortunately, the regressive version seems to be what the most conservative members of Congress want, and since the Republicans are opposing anything, then that's probably what we'll get. It's still better than nothing, and if you want better, then stop concern trolling about it and start voting for more progressive Congresspeople.

    You probably should pay attention to the things you are attempting to speak about. The republicans have offered their own solutions and they are not apposed to "anything".

Doubt isn't the opposite of faith; it is an element of faith. - Paul Tillich, German theologian and historian