US Carbon Trading
As of right now, the US carbon market is made up of several smaller regional markets – the Regional Greenhouse Gas Initiative (RGGI) made one, the Chicago Climate Exchange (CGX) is another, then there’s one in New York, etc. The big news, however, is that a bill called the Waxman Markey Bill (discussed below) just passed in the House, by a razor-thin margin. That means it’s also pretty watered down, as liberals, conservatives, Blue Dog Democrats and the rest all “traded horses” to ensure that their contituencies and corporate backers were happy. But it’s still better than nothing, by a long shot.
Andy Revkin of the New York Times has a great article on his DotEarth blog explaining the US climate change bill, and talking about the next big step – getting it through the US Senate without gutting it entirely. Another good commentator is Andy Stevenson, a financial services advisor and member of the NRDC (Natural Resources Defense Council). The NRDC’s “Switchboard” blog is, in general an interesting source of opinions, ideas, and informed council in this field.
For another, more detailed look at the Waxman-Markey Bill, look to this article from Worldchanging.org contributor Alan Durning – it is well thought out, better informed, and more moderate than Revkin’s, and tends more to the economic side of things than the inflammatory journalism. Another good link from Durning and his collaborators is Cap and Trade 101, a PDF that explains (in normal-person-speak) what cap-and-trade is all about. These are both good articles and highly recommended.
On the other side of the debate are folks like Wall Street Journal Op-Ed contributor Kim Strassel, who rallied climate change skeptics in an article entitled “The Climate Change Climate Change.” I’d take it with a grain of salt (a jar?), but there are some interesting points made and things to look at there. Really it just reminds us that the debate isn’t really one-sided, and even if you feel it is, there are other folks out there who are quite intelligent and think otherwise. Like it or not, it’s going to take more than scare tactics and apocalyptic predictions to get us where we need to go.
But as far as I’m concerned, climate change legislation would be a positive thing regardless of the factuality of climate change. Frankly, if concern about climate change leads us to be more efficient and careful with our fossil fuel usage, and spurs innovation in the myriad new renewable energy fields now cropping up worldwide, as well as greter efficiency overall, that would be enough reason to support these bills. And if carbon trading provides some tax revenue to reinvest into technology incubators and subsidies for reasearch & development and cleaner air, that’s fine with me (as long as the derivatives market doesn’t get too abusive – Wall Street has quite the reputation there…) Thankfully, Waxman-Markey actually has some decent provisions in it to prevent that sort of outright abuse – we’ll see if they go far enough.
wpconservation said
What constitutes an offset?
That’s a question I heard today, and a good one. Carbonfund.org does a good job of explaining Waxman-Markey’s carbon offset scheme, here:
http://www.carbonfund.org/blog/global-warming/carbon-offsets-waxmanmarkey/
wpconservation said
The need for close regulation and evaluation of offsets is shown clearly in articles like this one, from Financial Times correspondent Fiona Harvey, who, in her story entitled “Warning on Quality of Carbon Offsets” ( http://tinyurl.com/dubiousoffsets ) lays out the problems with using offsets as a bargaining chip with polluters. This is not a new problem – the E.U. trading schemes and Kyoto have bred a number of ineffective offset projects.
But if the US is going to get into the GHG game, it will tip the global scales in a big way, and it therefore really has to be done right.
wpconservation said
What about derivatives and financial schemes? Won’t carbon trading just be another bubble-prone market, subject to manipulation and crashes like the credit crisis we’re currently experiencing?
That’s a question that’s always on my mind, and frankly, I don’t know how perfectly it could be addressed. But at least I’m not the only one wondering…
Some folks, including a strong coalition of environmental groups and conservatives (rarely a pair lumped together), have declared them the next great bubble of toxic assets just waiting to happen. See articles like this one, in the WSJ’s blog “Natural Capital”, discussing “Subprime Carbon”, a Friends of the Earth report regarding carbon markets and their potential to basically generate huge profits for Wall Street giants like Goldman Sachs.
http://blogs.wsj.com/environmentalcapital/2009/03/26/subprime-carbon-environmentalists-warn-about-the-next-big-bubble/
This kind of media attention is NOT what senators and congresspeople are looking for right now, but it is certainly a valid set of concerns. Enter senators Feinstein and Snow, and Congressman Stupak, who together have introduced a powerful pair of bills that are shifting the regulatory debate about carbon trading.
The house version got gutted by a coalition of Wall Street friendly congressmen, but Feinstein and Snow’s amendment ( http://tinyurl.com/n8vgkf ) has been called the new “Gold Standard” for regulatory measures by Andy Stevenson, a very smart economist who is the NRDC’s financial adviser, who I cite in the original article on this page regarding Waxman-Markey. His post can be found at : http://switchboard.nrdc.org/blogs/astevenson/feinsteinsnowe_carbon_bill_cre.html
Overall, the fact of the matter is that the big (and little) trading houses are watching these climate bills very closely, and are lobbying hard for whatever they can get in terms of “market incentives” to create a large and minimally regulated market in GHG emissions. Thankfully, people are watching. The real question is whether the fear of a public backlash in the event of a speculative bubble will triumph over campaign contributions, agressive lobbying and insider politics.