Why cap and trade could backfire
Credits remove stigma – and may increase pollution.
(Page 2 of 2)
His message – albeit unintentional – is simple: Produce carbon to your heart's content; just pay a carbon broker to "neutralize" your carbon footprint and your guilt.Skip to next paragraph
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If Mr. Gore could not purchase offsets, would he feel more pressure to reduce his energy use? The likely answer is "yes."
Columnist Charles Krauthammer explains in Time magazine that "purchasing carbon credits is an incentive to burn even more fossil fuels, since now it is done under the illusion that it's really cost free to the atmosphere."
Perhaps that helps explain why most European nations have increased their carbon emissions since adopting the Kyoto global-warming treaty in 1997. By most accounts, the European Union's cap-and-trade system isn't working. In its first year of operation (2005-06), emissions covered by the trading scheme rose 0.8 percent. During the same time, according to the Energy Information Agency, emissions in the US – which hasn't ratified the Kyoto Protocol or adopted a cap-and-trade system – dropped 1.8 percent.
Samuel Bowles, a professor at the Santa Fe Institute, has noted that "[p]olicies designed to harness self-regarding preferences to public ends may be counterproductive. These failures occur when conventional self-interest-based policies compromise the beneficial effects of intrinsic motivation and ... a desire to uphold social norms."
The social stigma of carbon emissions grows stronger each day. As this stigma grows, companies are increasing their investments into research and technologies to reduce and store carbon. If Congress removes the stigma associated with these emissions by assigning a price to them, it may not like the results.
[Editor's note: The original version misspelled Samuel Bowles' name and misstated his title.]