Competitive Enterprise Institute | 1899 L ST NW Floor 12, Washington, DC 20036 | Phone: 202-331-1010 | Fax: 202-331-0640
In June 2001, the Congressional Budget Office reported to Senate Finance Committee Chairman Max Baucus on cap-and-trade programs for carbon dioxide (energy use emissions inherent to fossil fuel combustion). That is, CBO assessed the key component of what the Kyoto treaty would look like if implemented domestically. The theme was presented right up front in the introduction: "The economic incentives created by such programs are similar to those created by a tax on emissions." That's economist-speak for, "if it quacks like an energy tax."<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
President Bush would never offer an energy tax. So, yesterday he offered what CBO would call a "voluntary energy tax," as part of his "Climate Flagship Program," the alternative to Kyoto. It's complete with a government program to run this activity which, presumably, requires no government involvement given it is as voluntary as buying a pair of shoes, right? This is indistinct from a city building a gallows in the town square, while decrying capital punishment. It sounds like merely a stupid idea. But it's much worse.
First, at this writing, the regime, which we'll call the Office of Voluntary Energy Taxation, is headed for the Environmental Protection Agency, heaven help us, not the pro-energy Department of Energy. Even Senate Democrats knew they couldn't sucker their Republican colleagues into this, and had settled on the Department of Commerce in their own scheme. Of course, how would this White House know what the Senate Republicans think?
Second, this was viewed as the realistic interim step to a carbon cap-and-trade scheme by the pro-Kyoto business community, who we'll call the rent-seekers (those who pursue government programs creating windfalls or advantages over their competitors). Better yet, let's call them the Enrons, as Enron had led this pack of scoundrels until the current "situation."
The administration convinced itself that green kudos were certain to follow larding up a broad "climate change" action program falling short of Kyoto's restrictions. This, despite the greens' express insistence that Kyoto is 1/30th of what they demand, leaving no doubt that even agreeing to Kyoto will leave them hysterical for much more. The unveiled program includes mandatory reporting of carbon dioxide emissions, even though this naturally occurring gas is not a pollutant. This presents a nice roadmap for pressure groups to indict "climate criminals" in their disingenuous pressure campaigns. The government-run scheme for "voluntary" trading (purchase) of CO2 "credits" ostensibly facilitates reducing the volume of emissions reported, to buy some enviro slack.
This trading scheme tracks the recently enacted British program for voluntary industry commitments. Germany also has a voluntary Kyoto program, but so far without trading. And in a development privately trumpeted by White House aides, Japan affirmed that it cannot meet its Kyoto requirements, and so will pursue a voluntary Kyoto program. Praise ostensibly is expected, because this is what certain Euros are doing.
The administration misses a critical nuance. The Brits, and the others, merely get a temporary pass for creating a "voluntary" system based on the regulatory model, by promising to also ratify and implement Kyoto. Indeed, the European Union insists that all member-state programs become mandatory controls by 2005, and all Euro-nations vow ratification sometime this year. Japan's Diet is to take up ratification soon.
Leaving aside that a voluntary program is nothing but a predicate to mandatory controls, why else is it so foolish? To begin with, ridicule is due to any program expecting Party A to voluntarily transfer wealth to Party B for "property" lacking apparent value. This program will merely inflame everyone. The greens will savage it as "doing nothing" (and "leaving it to Big Energy"), even while the scheme continues to legitimize the theory that CO2 emission reductions must be forced.
And why the government regime to "create" a voluntary program — a particularly silly prospect given that a voluntary system demonstrably exists? Led by Enron, such transactions have occurred for several years — driven, like any future sales, almost entirely by speculation over a mandatory system. Then these credits, which typically sell for about $1 per ton, would be worth (according to most estimates) anywhere from $100 to $150. That's a tremendous return on investment, and the reason companies with underperforming stock and aspirations of trading (read: selling) — such as Enron, DuPont and Cinergy — so vigorously urge "action."
This only reaffirms the obvious fact that any "voluntary system" will soon become a mandate. The more companies speculatively accumulate credits which, under a cap, would be worth a relative fortune, the more pressure the well-heeled lobbying community will bring for a cap. The surprise would be if that did not occur. This huge lobby will decry having "done the right thing," only to face that the fruit of their do-goodery still has the value of, well, Enron stock.
The Bush administration should have been wise enough to avoid this trap.
Christopher Horner is counsel for the Cooler Heads Coalition.