Cap and Trade

CAP AND TRADE refers to an economic system seeks to CAP the emission of greenhouse gases by requiring that those who emit them have government permits. The system starts by granting permits on the basis of historical levels of production and/or auctioning them off to the highest bidders. Those who hold the permits are free to TRADE them. There is an upside to such an approach. If you need to reduce economic activity to a certain level, a credit or auction system like CAP AND TRADE can be a fairly efficient means of doing so. It also provides an economic incentive for companies to reduce emissions. In other words, IF there is a dire need to reduce emissions, then CAP AND TRADE might be a reasonable approach.


The downside of CAP AND TRADE is clear. First, CAP AND TRADE legitimizes government control over industrial production, and I don’t just mean the U.S. government. Because the “problem” is global in nature, emissions control requires a global solution. This not only means government intervention in markets, but “world government” intervention in global business activity.


Second, CAP AND TRADE is a broad-based tax. Whenever a new cost is introduced into production, prices rise. Company profits might decline a little, but the lion’s share of the increase is passed along to end users. Almost everything we buy is linked to energy consumption and emissions. Expect inflation across the board.


Third, CAP AND TRADE redistributes wealth from more developed countries to less developed ones. Ostensibly, credits are initially allocated on the basis of population. Because developed nations consume more energy per capita, their firms will need to purchase energy credits from countries that produce less. Hence, the price hikes that result from CAP AND TRADE end up in the hands of the third world.


But—you might ask—what if we are really facing a global warming crisis? Without a costly solution like CAP AND TRADE, the outcome could be a lot worse. Indeed, the global warming thesis purports that CO2 emissions cause the earth’s temperature to rise. The subtext to this claim is that “unfettered capitalism” is the culprit. Presumably, production plants, vehicles, and industrialization in general are responsible for most of the emissions. Unless we cut back on industrialization, the icecaps will melt and our very survival will be at risk. Because one country’s reduction in emissions can be countered by another’s increase, a GLOBAL GOVERNMENT solution is necessary. CAP AND TRADE, carbon taxes, and other remedies have been proposed.


The weakness of the global warming argument is not the negative effects of CAP AND TRADE, however. If the global warming alarmists are correct in their predictions, then some form of CAP AND TRADE might be worth discussing. THE REAL WEAKNESS IS THE SCIENCE. I’ll highlight a few key points here, but I recommend Horner’s Politically Incorrect Guide to Global Warming and the Great Global Warming Swindle video for a more detailed look at both the science and the politics.


For the record, I’m a social scientist. In other words, I am an active researcher who analyzes the effects of what people do in business situations. It is fair to say that measuring what people do and why is different from measuring chemical properties or reactions. I am clarifying my background here because many proponents of global warming often insist that I—as well as 99.9% of the population—am simply not qualified to evaluate the global warming research. For this reason we should “trust the experts,” or at least the majority of scientists who support the global warming thesis. It is interesting that many of these same people constantly criticize free markets even though they lack any background or training in business or economics. The point here is that “trust the experts” is a smokescreen. While the research claims might be complicated at times, if it cannot be presented convincingly to an educated audience, you have every right to be suspicious. Frankly, Al Gore’s theatrical attempt was an abysmal failure.


The global warming thesis rests on two assumptions, that the global is warming and that man is the cause, what scientists call “anthropogenic global warming”. The first assumption was widely accepted a few years ago, but data now suggests that the globe may be entering a cooling period. Critics have focused primarily on the second assumption over the past few years, and for good reason. If industrialization emits CO2 and causes the temperatures to rise, then why haven’t global temperatures risen consistently over the past couple of centuries? Why is the track record of the climate models used to predict the coming catastrophe so poor?


Could scientists be wrong? Time magazine’s June 24, 1974 issue featured a fascinating article on GLOBAL COOLING. Many scientists were calling for stringent measures then to halt the coming ice age. Their folly is self-evident. Likewise, it is interesting to note that GLOBAL WARMING has been replaced with CLIMATE CHANGE in the popular press, lest we be reminded that recent data suggests that temperatures do not appear to be rising at the moment. I’ve studied the science and politics of global warming and I’m convinced that human activity has little or no appreciable impact on global temperature. The earth warmed and cooled long before industrialization and it will continue to do so. I could be wrong, so I support additional research to see if a stronger case for anthropogenic global warming can be made. In the mean time, destroying capitalism and thwarting economic development on a global scale is not warranted. In other words, I see CAP AND TRADE as a costly proposal that may not even solve a problem that probably doesn’t exist.


The fact that CAP AND TRADE proponents are perpetual critics of business tells us a lot about the politics of global warming. Estimates suggest that CO2 permits would bring in $650-900 billion to the government coffers in 2010, about twice the revenues from corporate income taxes. Eliminating the corporate income tax while instituting CAP AND TRADE would still result in a net increase in government revenues. If proponents are primarily concerned with “saving the environment” rather than seeking greater government control of the economy, when why not REPLACE the corporate income tax with a CAP AND TRADE or CARBON TAX of some sort that generates the same revenue for Washington? The answer, of course, is that CAP AND TRADE is a train headed toward global socialism. Many on board this train seem to be more interested in the socialism than in the environment.


Historically, free and productive economies have made the most environmental progress. The greatest examples of environmental degradation over the past fifty years can be found in the former Soviet Union and China. Dissolution of the USSR is well chronicled, and China seems to be coming to grip with its environmental challenges now that a shift toward capitalism is producing real economic growth. The point here is that government control stifles the very economic development that is required to fund and foster constant environmental progress.


CAP AND TRADE will be one of the greatest legislative battles we will have to fight, but we must win. Let’s hope we can convince enough moderate democrats of the folly before it’s too late.

5 thoughts on “Cap and Trade

  1. Good analysis–the SWINDLE video you recommend should be required viewing in every classroom where they show Gore’s propaganda.

  2. “The cloud mystery”
    The movie The cloud mystery is the most trustworthy of all “climate-movies” so far.
    The Cloud Mystery is a documentary on how cosmic rays and solar activity affect cloud cover, and how this influences global warming.

    About global government:
    International governance is only effective when it is centralized and anti-democratic.
    One of the reasons why USA is the best country in the world is cos its decetralized political structure and the extensive seperation of powers.
    EU has a very centralized political structure and lack extensive seperation of powers. If EU dont do anything to its democratic shortage, then will we se a very totalitarian EU in the future.
    As soon as somebody says she/he is a world citizen or talks of world government, then you can be sure that she/he is a “communist”.
    Countries should work for free-trade and other agreements, but never give away their sovereignty to any centralized supranational “organization” cos it will only end in some kind of totalitarian government.
    Environmentalist want to give more power to supranational organizations, like UN, so “they can save the world” (as they say), but as more power is given to a centralized authority, the more likely is that we will lose the free society which gives wealth/better enviroment/freedom etc…. socialism is never the answer… socialism is always 100% evil… it doesnt matter how many Che t-shirts are sold world wide… socialism is always the way to misery and despair….
    socialist always find new ways to spread their evil ideology and now it is the “global warming” its messenger…

    Dont miss this:
    Penn And Teller Get Hippies To Sign Water Banning Petition

  3. okey…lets say that the global warming is man made and there is a need of cap & trade.
    The Kyoto protocol (=the holy enviromental protocol that cant been critized in europe) will only delay “the end of the world” with 6 years, but with an enormous cost. So, the world will end in 2106 instead of 2100…. The cost of kyoto protocol are extremly high. The price is enormous (billions of dollars). The consequence is lower GDP growth etc and the third world is doomed to stay poor instead getting a chance to get richer…
    So, if the global warming is true, isnt better if the world gets richer, the third world gets richer etc instead of stopping the economic growth through agreements like kyoto protocol?
    if the world is doomed, isnt better if the third world can get richer, so they can afford to conform to the new warmer enviroment? By keeping them poor will not help them more than they die in 2106 instead of 2100 (rich world can probably conform to the new enviroment). if the world gets richer, then theres also more money for R&D for new solutions to conform to the “global warming”…

    So, cap and trade is NOT a solution for them who believe in global warming and its not a solution for them who dont believe in global warming…
    So, the question is why do we have a “cap and trade” at the first place?

    The only reason to have cap&trade is to use it as an alibi for a big-government expansion (=more socialism…)
    karl marx laugh to us in hell……..

  4. Dr. Parnell,
    You continue to offer the kind of thoughtful analysis and solutions that the country needs to hear.
    Cap and trade is another embedded tax that will raise prices as the costs are simply passed along to consumers. This, of course, will be blamed on the evil corporations and greedy CEO’s. It is a trap that we must avoid at all costs.

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