Yesterday on NPR I had the misfortune to hear that president-elect Obama plans to engage in one of those “carbon cap & trade” schemes in an effort to reduce pollution and incidentally gin up some money through folks swapping carbon credits back and forth.
Sigh. I was really expecting better than this. What a shame it seems to be that the ivory-tower theorists seem to rule the roost in Washingtoon, and not the sort of folks (let’s call them “systems realists” for lack of a better term) who think it’s all too obvious what will happen at certain sorts of companies (like AIG) when they’re handed gobs of money with no rules for accountability.
Carbon cap & trade” schemes are sort of like the lite or warm & fuzzy version of fines. Normally when you break the law, and get caught at it, there is some fine to be paid or possibly jail time to be served.
Imagine, however, that you could sell off the fine or the jail term to someone else. (Just for kicks, let’s apply the concept to speeding when behind the wheel of an automobile. No doubt there are a number of Porsche / Corvette / Ferrari owners out there who would gleefully purchase the “speeding credits” from other people in order to continue endangering everyone else on the road.)
The trouble thus far with implementing systems of fines for pollution (at least in countries like this, where the big businesses have successfully warped the whole playing field in their favor) has been that the businesses have successfully lobbied to keep the fines low enough that they simply pay them and keep polluting anyway. No doubt for many of these companies, it is cheaper to pay the fines than to actually fix the problem and install scrubbers or upgrade their equipment or whatever. In some cases, effective-enough pollution controls do not yet even exist.
The next Plan B cooked up by our merry crew of non-realists in Washingtoon seems to have been designed by the power company lobbyists more than anyone else. Over cocktails and on golf courses and at power lunches, they suggested to our politicians that perhaps “some market activity could generate money” if those fines were thought of as “sellable rights to pollute” and were allowed to be freely traded.
What a concept .. allowing an entity to sell off its legal liabilities (or to allow it to purchase limited legal get-out-of-jail coupons) for breaking certain laws. This is classic disconnection-speak.
As for the concept of market activity itself to “generate money” and “result in increased value of the things being traded” .. didn’t we just try that with, umm, the whole stock market? It has now “lost” approximately half the “value” it had at the market apex in the fall of 2007. I put these things in quotes because the value was hallucinatory anyway, and it’s hardly possible to lose that which was never possessed in the first place. No doubt there are some retirement funds somewhere still holding Enron stock, or stock from pets.com, or stock in the makers of Beanie Babies.
The reason the current set of fines has been so easy for business to ignore is that the most egregious polluters have effectively bargained with the government in the same way that air traffic controllers, policemen, firemen, and other types are not allowed to do. In effect, they have told the government that if the fines get raised past X (whatever) they will shut down, raise their rates, lay off people, or “be forced to shrink their business”.
When the power generation industry takes this approach with government regulations about pollution, it’s a /really/ big hint that those same operations should be state-owned and not run by independent operators seeking profit.
There is no guarantee whatsoever that the traded prices of carbon credits (again, the sellable rights to pollute, or the purchasable rights to violate the law, whichever way you prefer to see it) will rise; and if they do not rise, then the promise of money generation via market activity will have been proved to be entirely false. There is no guarantee that the most polluting industries will not simply continue to ignore the fines or sell off their right-to-pollute, both of which have been scaled so as to be cheaper than fixing the problem at the point of emission. Again, this approach was designed by and for the contingent of lobbyists representing the most polluting industries .. what else could we expect from them?
In that vein, I’d like to put forth a modest proposal, modeled on Johnathon Swift’s excellent proposals, on how to deal with corporate and executive crime. Every citizen should be granted a $5,000 credit against the legal ramifications resulting from any possible offense along the lines of doing a certain level of harm to the executives at any corporation who have been found to break the law operate fraudulently, who have misspent government bailout monies, who have operated at levels of gross inefficiency, or who have polluted the environment. Any citizen committing any of those offenses /after/ selling off his or her credit shall be subject to the full legal penalties thereof. Likewise, any citizen who’s purchased enough “crime credits” shall face limited penalties or even no penalties at all if sufficient credits are available. These credits shall be fully subject to being sold and traded in a special market designed for these same credits.
Sensible, reasonable, responsible, modest caps shall be placed on the total possible fines for doing a certain level of harm to the executives at any corporation who have been found to break the law operate fraudulently, misspend government bailout monies, operate at levels of gross inefficiency, or pollute the environment. In keeping with the modest (and excruciatingly lame) pollution fine caps established by the lobbyists representing the most polluting industries, we may wish to consider the following set of fines:
$10,000 .. kidnapping an single executive (multiples at slightly reduced fines);
$20,000 .. inhuming an executive from such a company (multiples at slightly reduced fines);
$30,000 .. decommissioning a plant (or piece of machinery) that’s polluting .. with fines to be scaled to the amount of pollution generated by the thing in question .. for example, decommissioning a Hummer2 might be a $200 fine, while doing the same to a coal-fired power plant might be a $30,000 fine;
With all the market activity generated by the buying and selling of these credits, it’s almost certain that we’ll all make money off it. Praise capitalism and pass the ammo, sister!