Why the Sierra Club is worried about 'cap and trade'
The Sierra Club has some serious concerns with California's 'cap and trade' program, but they may not have as much to worry about as they think
In a pinch of irony, the Sierra Club is upset about California's nascent Carbon Cap & Trade program. Has the Sierra Club joined the Tea Party? That would be Time-AOL merger! At the tender age of 45, I speak in cliches. "Every journey starts with a first step". California is the green guinea pig as we try to launch a credible carbon cap & trade program. The goal is to credibly commit to a slow ramp up in the price of carbon emissions. Right now the price = 0 and this is too low. The hope here is that by having a slow ramp up (i.e allowing the price of a ton of carbon to rise over time) that this incentivizes polluters such as fossil fuel power plants to green their game. They will have plenty of lead time to plan for such changes and can move on whatever margin they believe is most cost-effective for them. If polluters must change their ways (thanks to this regulation) then this will thicken markets for low carbon products and encourage specialization and human capital investment that will in total lower the cost of abatement. The lessons learned will be passed on around the world. In this sense, California is providing public goods.Skip to next paragraph
Mathew is an economics professor at UCLA and has written three books: Green Cities (Brookings Institution Press); Heroes and Cowards (Princeton University Press, jointly with Dora L. Costa); and in fall 2010, Climatopolis: How Our Cities Will Thrive in the Hotter World (Basic Books).
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Mr. Magavern is concerned about;
1. reliance on offsets purchased by sellers from outside of California
2. local environmental justice
3. forest offsets
4. enforcement problems with offsets
5. handing out allowances to polluters
I will try to tackle these issues in this order;
1. As I understand it, California's AB32 allows firms who must comply with the cap to purchase carbon offsets from other entities who reside outside of California. So, if I must reduce my emissions by 10 tons --- I could pay some economists in Boston to walk more and drive their car less or pay a land owner in Brazil to not cut down his trees. These are offsets and I will search for the cheapest way to meet the regulatory requirement.
A couple of serious issues arise. Do such international credits actually take place or does the Brazilian land owner say that he has kept the forest a forest or did he cut it down anyway and cash my offset check? We need serious environmental accountants here to verify claims. There is also a counter-factual question; did my paying the Brazilian change his actions? If he would not have cut down his forest had I not sent him the check, then the California Cap & Trade has had no impact on global carbon emissions. It affects income transfers but not real activity.
Mr. Magavern wants carbon emissions reductions to be "home grown". He tries to be an economist with a Big Push argument claiming that the green economy will be stimulated if we do all of the reductions here in state. There is some truth to this but the costs of compliance will be higher and he intentionally avoids discussing this point.