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Cap-and-Trade Schemes are Not Markets

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Cap-and-Trade Schemes are Not Markets

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Barring the trickery of a lame duck conference committee, cap-and-trade legislation to curb carbon dioxide (CO2) emissions is dead in the 111th Congress. Some cap-and-trade supporters blame President Obama for not taking a more hands-on role. Others blame environmental groups for waging a $100 million lobbying campaign without winning a single GOP convert to the Kerry-Lieberman bill. Others blame the allegedly “well-funded denial machine,” even though proponents, who include major corporations like BP as well as the big green lobby groups, heavily outspent free-market and conservative advocacy groups.

Now some cap-and-trade supporters are trying to get Republican lawmakers on board pushing cap-and-trade as a “market-based” environmental policy and trying to spin GOP opposition to cap-and-trade as self-contradictory. Recent statements by Exelon Vice President Betsy Moler and Resources for the Future President Phil Sharp illustrate this approach.

“Cap and trade is really a Republican instrument that grew out of a lot of the Republican thought leaders as a market-sensitive, market-friendly, anti-command-and-control mechanism,” Moler told the Climatewire news service in August. “Now, some of the same people who invented it have turned on it as an energy tax … It’s a huge missed opportunity. I don’t know where you go next.”

Sharp, who, as a Democratic House member from Indiana, supported energy deregulation, told Climatewire,  “[W]hat is really unfortunate in the public debate is that the current Republican leadership has overthrown one of the great Republican successes in this country [under President George H.W. Bush], to capitalize on the flexibility of the marketplace” to improve environmental regulation. 

Moler and Sharp miss several key points. They confuse ends and means. Only if Republicans want government to raise energy prices, make coal uneconomical as an electricity fuel, or restrict Americans’ access to carbon-based energy would they be inconsistent to oppose a “market-based” strategy to accomplish those objectives. But those are the environmental movement’s goals, not the GOP’s.  

Moreover, the alleged successes they cite are not as impressive as they seem. More importantly, experience with cap-and-trade programs in other areas has little relevance to the control of carbon emissions, for the reasons outlined below.