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!
Zulu Kilo 
Or maybe we could do like the Mexican drug lords…
“Earlier this month, someone had hung the decapitated body of a local drug thug from a bridge on the airport road. Later the head appeared downtown at the Plaza of Journalists, wrapped in a plastic bag, carefully placed at the foot of a statue of a newsboy hawking papers.”
http://www.msnbc.msn.com/id/27899703/
“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.”
Carbon cap and trade schemes are hugely problematic, and on many levels, but I don’t think your characterization of cap and trade is accurate or fair.
Not like nerf fines Nudge, because comoditizing carbon, and putting in place a system (e.g. regulations, market incentives, strict auditing) that drives the price per ton upwards, motivates actions for reducing emissions. Although someone may end up polluting more (through purchasing credits or securing offsets – say a power plant), most would pollute less (selling credits), and some tonnage would be retired, resulting in a net reduction. That’s theory on paper.
I know, I know. There are whole levels of problems with this, including the premise that it would make a difference with respect to climate anyway, even if done well. Secondly is the prospect of embarking on this in the twilight years of oil, and on the doorstep of the second age of coal, and the umpteenth age of war. Then there are the issues of financial and economic calamity, and really big questions regarding whether we are capable at this point of instilling the level of integrity a program like this would require – and this during a time when our honor and integrity as a society is so low as to be bankrupt itself.
But still, as a shell-shocked enviro nut case, I say onward! This economy we have now is in a shambles and it sucks anyway. Well meaning people are driving this cap and trade approach (just don’t put me in a room with them). Yes corporations and their minions are scared of getting fucked and/or left behind and are working to influence it (assholes!). Greedy vultures are circling it, anxious for another bubble (more assholes!). It’s got all the ingredients, sounds delicious! Cut me a slice.
There’s a good chance it will happen. However, I believe it will prove to be so complex, difficult and contentious that it may not occur for several years. Its not clear of course what we will be capable of, or what will inspire us, in “several years”. A host of black swans will probably maybe decide that.
Or “re-classify” CEO’s as top zombies, then it’s a free-for-all; lord knows they NEED BRAINS!!!
BTW, the scheme they’re thinking of implementing in Oz will/would* have each polluter with a shrinking cap, i.e. they can’t keep buying credits and have to reduce pollution eventually, no matter how many credits they buy.
*probably won’t.
I talked to thal last Friday. I can say this much, he’s doing well and he has a plan. The rest is classified.
Holmes, thanks for the update about Thal. He’s been missed here.
Apologies to all legitimate lobbyists here who do no harm .. I posted this before reading BB’s latest interview.
Saint Bif, thanks, but this “carbon cap & trade” theory that’s only on paper so far is doomed to fail. The theory itself is not as crucial to the outcome as are the players involved, the history of the game thus far, who’s holding the trump cards, the at-best-ambiguous nature of public opinion (**) and its corresponding manifestations in the behavior of their congresscritters, and how hard the players are going to push it. This is sort of like devising a more intricate set of rain gutters, all Escher-like, in an attempt to show that water will sometimes flow uphill. Not going to happen. The basic nature of the game is that it costs polluters less to simply pay the fines, even while they’re paying for lobbying efforts to reduce or eliminate those fines, of course, rather than fix the emissions problems. This is as simple as water responding to gravity. You might sometimes be able to make it find a more circuitous path downward, but down it will go, and in time it will “find” the shortest possible path in its own singleminded way.
** Oh yes, public opinion. ROFL. Snort. LOL. We want clear skies and safe groundwater, but we also want cheap electrical power to run all our flatscreen tee-vees, game consoles, wall warts, garage door openers, shop tools, bright indoor lights, computers left running 24/7, and more, but we don’t want that messy coal power stuff or that nuclear power stuff. In fact, most of us don’t want power plants anywhere near us, even though we all appreciate the bounty of cheap electrical power. For starters, it’s providing the 65W for this laptop, and more for my neighbor’s unsecured wifi access that’s left running 24/7, and it just made me a fresh pot of coffee, the good stuff of course since this is a holiday :)
Oh, but there’s more to this strange dichotomy here. We all want to drive whatever vehicles we want and we like the freedom to have as many kids as we please, but no one likes road congestion or living congestion. Go figure.
The only way I could see this cap & trade scheme work (and that’s with many big if’s attached) would be under very special conditions which the primary players themselves would be constantly working to undermine anyway. You’d want automated 24/7 physical surveillance of the levels of pollutants being released, with the data constantly uploaded to the net for all involved to see. You’d need someone to independently maintain the sensors and their physical security, since polluters will otherwise have the means, opportunity, and motive to tamper with them to change the outputs. I could write pages of further conditions to attach, but you get the drift.
I doubt this cap & trade stuff will result in any power plants polluting more than they did before, but I’m fairly certain that it will cost a bit to set up this sort of program and that it is a doomed and fundamentally flawed idea. After the failures globalism and trickle-down theory, it’s nowhere near certain that we have the money available to invest in schemes like this. I’m happy to place bets on this program not working .. in gold of course. Any takers?
SB, sorry, don’t mean to sound too cynical, but I speak from the experience of working in business (sales too) and working with corporate auditors and others of that type. If people think they can get away with [whatever] they shouldn’t be doing, they will. Often they lie about it in the face of clear evidence to the contrary. Devising a good enough straitjacket to keep someone in line is almost always more effort than firing the person involved and finding/training a replacement.
My favorite example of this type of behavior, as shown in corporate Duhmerica this past week or two, was the revelation that GM had spent something like $70million on a recent effort to lobby to prevent higher CAFE standards from being written into the law ~ which they claimed would have made them uncompetitive. (Ha, well, they seem to be able to manage to be uncompetitive all on their own, without any help from anyone else.) In other words, they shelled out a whole lot of money (against the government folks trying to write the laws) in order to continue making big clunky vehicles with poor fuel efficiency. And now those same companies are asking for money from the government in order to help them make smaller and more fuel-efficient vehicles.
For a toasty little analogy, this is sort of like a home-owner who’s storing a couple hundred gallons of regular unleaded in his own basement (perhaps in barrels), who gets caught at this fire safety violation, who spends many tens of thousands of dollars defending his right to store explosive fuel indoors, who then suffers a horrible conflagration, and who then sues the fire department (presumably for allowing him to store fuel at home) in order to get some money to rebuild his home.
Sorry, but after these year I’ve had a little too much of corporate greed. We’ve moved past the tar & feathers stage .. it’s time for pitchforks & torches.
I’m real busy today, cooking the huge turkey with natural gas is easy, the hard part is trying arrange for some carbon swaps on a holiday, I’m going to need a couple extra tons CO2, especially since I have nine people coming to my house in four cars, and one is in a BFT.
Hey Nudge do you remember it was a year ago – the Thanksgiving Day Massacre and Tea Party, over at CFN. Or as Doom better named it – The Attack of the Cornucopian Zombie Trolls. I think that particular Thanksgiving food fight started because Dale was trying to sell Saudi PR statements on reserves as being fact.
“I’m glad se here still recognize that the “finance crisis” is in some ways the Black Swan, but that doesn’t make the other two go away.”
JR-
As I have posted here and at CFN over the last year, my take is that the “finance crisis” is not a black swan. I have reading material going back to 1998 warning about a housing bubble. And the Fannie-Freddie debacle has been unfolding since the early aughts for everyone to see.
My biggest issue with Obama is his campaign finance chairman, Penny Pritzker. The billionaire Pritzkers are poster boys and girls for business as usual. She was CEO of a bank mixed up in the mortgage fiasco and the family’s money dealings are thoroughly opaque (offshore entities, etc.) to avoid taxes. Tsk, tsk, tsk.
“Or as Doom better named it – The Attack of the Cornucopian Zombie Trolls.”
Attack of the Clueless Cornucopian Zombie Trolls (ACCZT).
Very close, EE.
Sorry, credit to Bif. I need to slow down.
“but I’m fairly certain that it will cost a bit to set up this sort of program and that it is a doomed and fundamentally flawed idea.”–Nudged
BINGO. The nature of this game, which smart Obama knows, is money shuffling, it’s just another operation that moves money around. It’s another scheme or scam, and it’s disgusting.
“After the failures globalism and trickle-down theory, it’s nowhere near certain that we have the money available to invest in schemes like this.”
Right again. It’s a terrible waste of time and resources. It sadly shows a lack of imagination and trustworthiness in those we have placed much hope for our collective future.
Hi St. Bif, EE, and Doom .. hope everyone is having a wonderful Thanksgiving. Wow, have we been active on CFN that long? This is bad, I can’t remember anymore when the gang coalesced over on Jim’s blog.
The ACCTZ debacle was entertaining indeed. Wasn’t 2007 the year that also saw the Patrick Incursion? If that wasn’t pasting, wow, that monkey was able to type. He may have visited the blog once or twice since. Not much IRL mention of those urbanates either.
I apologize to all for the lack of links, footnotes, graphics, videos, etc in my posts. The blog editor has several times mentioned this failing.
better get some pics in there, nudge.
EE,
I agree, a financial crisis in itself is not a black swan.
Kinda like when someone fires a RPG at your house and the door and window are open.
The rocket could hit your front wall and destroy your house, or it could go through the window and hit your bedroom wall (and destroy your house), or, it could go through your open door and hit the kitchen wall (and destroy your house).
The timing of the explosion doesn’t make a great deal of difference. So whether it’s a financial, environmental or over-population/food crisis, the result is the same, and entirely expected.
Question is, which room are you in at the time?