Anyone Like Emissions Credits?
When President Clinton had the United States sign the Kyoto Protocol on "global warming," his gesture was widely viewed as PR, pure and simple. After all, the Senate already was on record 95-0 against implementing the treaty as written. If the United States is safe from Kyoto's global constraints on economic freedom, why is corporate America booking seats on the, Kyoto Express?
The lure is potential future gains from emissions credits that only become "real" if Kyoto is implemented (those credits could have a current value if securitized with an appropriate risk factor), as promised by the Credit for Voluntary Early Action Act soon to be introduced by Sens. Chafee, Mack and Lieberman.
These distinguished senators believe there is a "third way" between pro-Kyoto and anti-Kyoto forces. For the global warming crowd, advance credits for emissions reductions might help abate "greenhouse gas" production while Kyoto is pending; for businesses, credits could reduce long-term compliance costs under a Kyoto-like arrangement, and squeeze tangible value from abatement steps already planned.
There's never a real "third way," though. Early credits create a new class of stakeholders in a Kyoto-like regime, divide the business community between "winners" and "losers" in the emissions reduction game, and alter the political dynamic in favor, of Kyoto.
This dynamic is familiar from our tax code, coupling high rates with myriads of exemptions, privileges and special rules for favored industries and activities.
Over the years, businesses and individuals have "bought into" this high-rate system by embracing these grants of special tax relief. The result is an economically destructive, intrusive tax regime, plus a tremendous transfer of power to the federal government. As the Kemp Commission on tax reform found, "The history of our tax code, in economic terms, mirrors the course of most addictions: advancing dependence, diminished returns and deteriorating health of the afflicted."
Do we really want to repeat that experience on a global scale? Kyoto and its progeny threaten a vast array of international (and domestic) bureaucrats allocating economic rights and privileges based on vague standards, arbitrary conditions and bad science.
It's troubling that American business would buy into this global industrial policy scheme, lining up to pledge non-hostility to Kyoto in return for the prospect of legislation that might give them relief from Kyoto's potentially massive costs.
This "slow boat to Kyoto" is less defensible than business-sanctioned high tax rates, since we need some system for raising revenues.
It's not clear that we need any structure for limiting "greenhouse gases," so shaky is the science and so tenuous the relation between "global warming" and internationally enforceable emissions limits targeted against fossil fuels.
And the rules governing emissions trading aren't even agreed on —they're still under separate negotiation.
Lest we forget the big picture, Kyoto can't pass the Senate because it forfeits our economic sovereignty to unaccountable international bureaucrats, imposes huge job-destroying costs on our economy, and implies massive wealth transfers among countries, industries and companies.
Ceding that power to unelected global authorities would be a hard sell even if the science was sound (which it isn't). Buying into that power transfer in exchange for a vague promise of fmancial relief doesn't make sense for any.American business.
Our tax code shows what happens when government's power to award special privileges swamps the public interest Let's not compound the error by bribing U.S. companies to acquiesce in the biggest global regulatory regime yet conceived. Kyoto must stand or fall (as we expect it will) on its merits.