Battle4Liberty

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.