Will the cap-and-trade repeal initiative succeed? The markets might think so
CEI’s Stone Washington was cited in The Center Square on the repeal of cap-and-trade:
Stone Washington, research fellow with the Competitive Enterprise Institute’s Center for Advancing Capitalism, had a somewhat different take.
“I both agree and disagree with the view expressed by Dr. Sjoblom,” he emailed The Center Square on Tuesday. “Washington state’s cap-and-trade law does provide for a quarterly auction system that trades allowances of emissions between participating organizations. A qualifying organization can indeed bid and purchase the allowance as if it were a futures contract, since the obtained allowance validates the company to produce a certain tonnage of greenhouse gas emissions at a proscribed period in the future.”
But not all allowances are created equal, according to Washington.
“However, this system does not represent a true futures trading regime in the traditional sense, since the allowed GHG [greenhouse gas] emissions do not represent actual commodities,” he explained. “Allowances are a sort of carbon credit, which represents a government-imposed environmental currency that merely permits business activities producing GHG emissions. By themselves, the allowances are not financial instruments and do not hold any tangible market value. As I wrote in the past, ‘such credits derive worth from a company’s attempt to decarbonize part of its operations.'”
But that’s not the only difference between Washington’s credit futures and a conventional futures trading market “due to the fact that there is no free market incentive to participate and no reasonable means for profit generation. Only governmental proponents of Washington state’s climate change reduction agenda stand to benefit from this.”
Washington characterized the Evergreen State’s carbon auctions as “a way for companies to essentially pay the state government for conduct that was formerly unregulated, namely, industrial activity that produces GHG emissions.”
He concluded by noting, “The only incentive for organizations to participate stems from them seeking to avoid any compliance violations to the Climate Commitment Act’s goal of reducing overall emissions in the state. The burden to pay the state government hefty fines incentivizes companies not to violate the Act by purchasing as many allowances as possible under this artificial cap-and-trade market.”
Read the full article on The Center Square.