Climate scientist James Hansen has gone on the warpath against cap-and-trade. (See this op-ed in the NYT, among other recent examples.) Perhaps what's most alarming is that, for all his intelligence, Hansen doesn't appear to grasp even the basic elements of cap-and-trade systems. In a blog post last weekend, economist Paul Krugman took him to task: ... today’s op-ed article suggests that he really hasn’t made any effort to understand the economics of emissions control. And that’s not a small matter, because he’s now engaged in a misguided crusade against cap-and-trade ... What the basic economic analysis says is that an emissions …

Just colossally ignorant. That was all I could think to say on viewing the latest eco-video web sensation, "The Story of Cap-and-Trade" by Annie Leonard and Co. No one does a circular firing squad like the Left and this contribution is a potential Hall of Famer. Leonard has a disarming Every Gal schtick, but it masks a shockingly ill-informed -- or maybe outright deceptive -- "critique" of cap-and-trade. I was working myself up to rant about it, but Dave Roberts got there before I did. To give you a flavor of Dave's take-down: I hesitate to call this an “argument” in …

Though most climate policy wonks are now focused on U.S. federal legislation or the summit in Copenhagen, the Western Climate Initiative is soldiering on -- and doing good work too. The WCI's Markets Committee recently released a white paper on carbon market oversight that is worth a read. While the paper doesn't draw many conclusions about WCI's final design, it does provide a very helpful summary of the principal regulatory options in both the U.S. and Canada. It also includes a nice overview of regulation under the E.U.'s cap-and-trade system, as well as a discussion of the regulatory options under consideration for the big …

Contrary to claims that cap-and-trade is untested or uproven, there are a half dozen or so operational cap-and-trade programs already functioning in the United States. Of these, the most significant are the Acid Rain Program and the NOx Budget Trading Program. Both have large vibrant trading markets, both have been extremely successful in achieving environmental aims, and neither has evidenced manipulation or gaming. The Acid Rain Program has been administered by the U.S. Environmental Protection Agency since 1995. It includes a cap-and-trade program for sulfur dioxide (SO2) -- and all evidence suggests that the program has functioned exceedingly well. In fact, the program achieved …

In spite of what you may have heard, Europe's carbon market is working beautifully. The E.U.'s Emissions Trading Scheme (ETS) has been operational since 2005 and we're now getting a good look at how it functions. It turns out, it's a remarkable success story, both environmentally and economically. Let's briefly review the major pieces of evidence. 1. European Environment Agency. A November 2009 report finds that the continent is well on its way to meeting its Kyoto targets thanks in large part to its cap-and-trade program. In fact, by 2007, 14 countries had already exceeded their reduction goals, including the wealthy industrial giants …

With all the hand-wringing over the alleged risk of market manipulation in cap-and-trade, you'd almost forget that the United States already has a carbon cap-and-trade program up and running. But it does. The Regional Greenhouse Gas Initiative (RGGI), a regional program among 10 Northeast states, has been auctioning permits, allowing trading on a secondary market, and even, in a way, encouraging trading in derivatives. And guess what's happened so far? ... we find no evidence of anticompetitive conduct. Participation by a large number of firms is an encouraging sign of competitiveness and efficiency in the secondary market. That's according to a May 2009 report …

On the announcement that the Clean Energy Jobs (CEJ) bill cleared a key Senate committee last week, Friends of the Earth complained: The bill’s backbone is a poorly regulated carbon trading scheme that entrusts the Wall Street bankers who brought us the current economic crisis with the responsibility to solve global warming. Sheesh. Of course, this isn’t true. It’s not even sort of true. It’s just an attempt to torpedo a bill by sowing confusion about an important and sensitive issue. (There are some legitimate critiques of the bill -- and Friends of the Earth (FoE) makes some of them …

Worries about “gaming” or market manipulation sometimes crop up as an objection to cap-and-trade, often with reference to recent shenanigans in the financial markets. Some fear that a cap-and-trade system could be manipulated to artificially raise -- or lower -- permit prices to generate profits for a few at the expense of consumers. While distrust and concerns about scamming a carbon market are understandable, they’re not warranted. To put some of these fears to rest, it’s informative to look at existing cap-and-trade programs. Neither of the two programs regulating greenhouse gases nor a third controlling acid rain pollutants has been …

I love reading Matt Taibbi. I mean, who else puts together a sentence like this?: The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. Funny and righteous at the same time. Good stuff. But in a piece he wrote for Rolling Stone this past July, he made some awfully curious -- and curiously unsupported -- allegations about carbon markets: ...if the Democratic Party that [Goldman-Sachs] gave $4,452,585 to in the last election manages to push into existence a groundbreaking new commodities bubble, disguised …

I've got an emerging obsession: the risk of market manipulation in cap and trade programs. It's something you hear about all the time, at least in carbon policy circles, but the details about "gaming" always seem to be in very short supply. Still, it's something we should take a close look at because the alleged consequences are so severe. So at the moment, I'm gearing up to read everything important that's been written on the subject. (If you know of good stuff, please send it my way.) In the meantime, I want to share this recent short brief written by economist Laurence DeWitt at Pace …