Cataloguing the errors in “The Story of Cap-and-Trade”
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 the video, since it mainly consists of using the words “Enron,” “bubble,”“Wall Street,” and “scam” suggestively, without saying anything at all specific about why this commodity market — which would be one of any number of commodity markets, most of which work perfectly well, including the carbon market in Europe — would be uniquely evil.
I do have one major complaint about Dave’s post, however: he’s way too nice about it. The video’s 10 minutes is so loaded with factual inaccuracies and deceptions that it would literally take me hours to unravel them all. It’s really quite a feat.
It’s not just the trading part that she butchers. She comes close to flat out lying about offset programs (and I say this as a card-carrying offsets skeptic), fumbles on allocations, blinks on consumer fairness, and mangles a description of Europe’s experience. In fact, so childish is the video that most of the criticisms are actually directed at “these guys,” a pair of stick figures in pin-striped suits. No kidding, the critique is literally directed at a caricature.
Toward the end, she suggests a handful of policy alternatives. Of course, she doesn’t mention this, but many of these would actually be enhanced by an operational cap-and-trade system (funding renewable energy, for example). But others are almost laughably hackneyed (“concerned citizens around the world need to speak out”). It’s just bizarre.
I’m not going to waste any more time writing about it. Go read Dave’s post. But I’ll close with just one important point: carbon trading is absolutely unrelated to the program’s environmental integrity. Get that? “Cap” and “trade” are two different words. Leonard and others don’t seem to understand this elemental fact. Even if some Wall Street bad guys made money on the program, it would still reduce emissions. The trading doesn’t affect the cap. It just doesn’t.
So if you’re worried about carbon, then cap it. If you’re worried about carbon trading, then regulate it. And if you’re worried that your knee jerk misunderstandings about climate policy are being ignored on the eve of a game-changing global agreement, go viral with an Internet video.
UPDATE: De Place couldn’t resist cataloging the errors, so here goes:
You can find the transcript here (PDF), though just reading the transcript doesn’t give you the full picture of the snark conveyed by the animated cartoons that accompany Annie Leonard’s delivery in the video. Here’s the video:
Now, let’s take an inventory of all the errors. Get comfy, it’s gonna take a while.
“Okay, meet the guys at the heart of this so-called solution. They include the guys from Enron who designed energy trading, and the Wall Street financiers like Goldman Sachs who gave us the subprime mortgage crisis.”
False. For decades environmental activists, progressives, and scientists have labored against overwhelming odds to enact a cap-and-trade program. In no sense are “these guys” from Enron and Wall Street at the heart of the solution. They are not now and they never have been.
But I’ve got to hand it to her: this insult really stung. All these years that tens of thousands of folks like me have worked long hours at low pay (or no pay) to hash out a workable and effective climate policy and it turns out that our purported allies like Leonard would rather paint us as duplicitious bankers in pin-striped suits. (That’s not an exaggeration, by the way: that’s how the animated cartoon depicts cap-and-trade proponents throughout the video.)
“Their job is to develop brand new markets. They stake their claims and then when everyone and their grandmother wants in, they make off with huge amounts of money as the market becomes a giant bubble and then bursts.”
Odd. Uh, what? This doesn’t really have to do with cap-and-trade so I should probably leave it alone, but it’s perplexing that this is what she thinks markets do. But I want clarification from the bien-pensants to my left: are progressives now anti-market in all circumstances? Do the recent bubbles mean that we’re now supposed to be, in principle, opposed to stocks, commodities, etc? Are we supposed to hate the acid rain cap-and-trade programs too?
“…they’ve got a new idea for a market — trading carbon pollution.”
False on two counts. It’s not a new idea. Brokers have participated in cap-and-trade markets since the 1990s and in carbon markets for about a decade. There have been no instances of gaming or market manipulation.
What they trade is not carbon pollution — sounds nasty, right? — but a limited right (an “allowance” or “permit”) to emit carbon pollution.
“They’re about to develop a new $3 trillion bubble…”
Deception. A trading market is not a bubble. There are trading markets for U.S. Treasuries, soybean futures, municipal bonds, and stocks in Coca-Cola to name just a very few things that are traded. (Oh, and carbon permits, I almost forgot.) None of these things are bubbles.
“…how are we gonna reduce carbon 80 percent and not go back to living like Little House on the Prairie? Well, these Cap-and-Trade guys are saying that a new carbon stock market is the best way to get it done.”
False. These “Cap-and-Trade guys” (that’s me and the banksters, I guess), are saying — as we have been saying for years — that the best way is to put a cap on carbon. I work on climate policy full-time and I have literally never heard anyone say that “a new carbon stock market” is the best way. I’ve never heard anything like it, in fact.
“…these guys take their fee as they broker this multi-trillion dollar carbon racket, I mean market.”
Classy. Not that this kind of thing merits a response, but its worth pointing out that carbon trading brokers reduce costs. That means they save money for consumers (and businesses) and help the whole program function more smoothly. Buyers and sellers of carbon permits (or anything else for that matter) don’t have to use a broker; people use brokers because it’s cheaper and easier too — and, yes, brokers take fees for their services.
“A lot of environmental groups that I respect do too. They know it’s not a perfect solution and don’t love the idea of turning our planet’s future over to these guys…”
False. Cap-and-trade does not “turn our planet’s future over to these guys” (meaning the Wall Street guys). The most elemental fact about cap-and-trade is that carbon trading is absolutely unrelated to the program’s environmental integrity. Even if some bad guys made money on trading, the program would still reduce emissions. The trading doesn’t affect the cap. At all. Not even a little.
Under cap-and-trade, our planet’s future remains where it is now: in our hands. It’s up to governments to set firm legal limits — cap, in other words — on climate pollution. Trading carbon permits doesn’t change that.
“…even the economists who invented the cap-and-trade system to deal with simpler problems like fertilizer pollution and sulfur dioxide, say cap-and-trade will never work for climate change.”
False. They do not say that it will “never” work for climate change. (Go ahead and read the lengthy footnote provided for this claim in the transcript.) They are skeptical, to be sure, but largely because they are concerned about enforcement of a global program. Of course, it’s unlikely that we’ll ever have, or even want, a global program. We’ll have national or regional programs that are loosely coordinated.
“When it comes to any kind of financial scam, like subprime mortgages or Bernie Madoff’s pyramid scheme, the devil is always in the details. And there are a lot of devils in the details of the cap-and-trade proposals on the table.”
Deception. I don’t even know what this is supposed to be about other than fear-mongering. Bernie Madoff! Ooga-booga! What on earth do “financial scams” have to do with cap-and-trade? (Hint: we never find out.)
“Devil number one is known as Free Permits, which is why some people call this system Cap and Giveaway.
False. Free permits are not a feature of cap-and-trade, but rather of cap-and-trade done poorly. There’s a simple solution: auction or sell the permits. The major U.S. cap-and-trade bills take a complicated hybrid approach, auctioning some, giving some away, and reserving the value of others for public benefits.
“In this scheme, industrial polluters will get the vast majority of these valuable permits for free. Free! The more they’ve been polluting, the more they’ll get.”
Confusion. Free allocation of permits does not imply that the allocation occurs on the basis of historical pollution. There are plenty of other principled ways to give away permits, some of which will be undertaken by the climate bills in Congress.
“In Europe where they tried a Cap and Giveaway system, the value of the permits bounced around like crazy…”
Confusion. It is more or less common knowledge in climate policy circles that the reason that the value of permits in Europe bounced around initially had little to do with the fact that permits were given away for free. It was because too many permits were distributed at the outset, a problem that has since been corrected.
“…energy costs jumped for consumers…”
Confusion. Increased energy costs have nothing whatsoever to do with the method of allocating permits. Any program that restricts carbon — taxes, cap-and-trade, or regulation — will increase costs.
“Carbon emissions actually went up!”
False. Carbon emissions went down.
“MIT economists say the same thing would likely happen here in the U.S.”
Cherry-picking. She doesn’t mention the legions of economists who support cap-and-trade.
“Instead of just giving permits away to polluters, we could sell them and use the money to:
- build a clean energy economy
- or give citizens a dividend to help pay for higher fuel prices while we transition to that clean energy economy
- or share it with those who are most harmed by climate change. Some people call this paying our ecological debt”
Deception. The implication here is that existing cap-and-trade proposals won’t do these things. In fact, they will — at least partially.
“Did you know that in the next century, because of the changing climate, whole island nations could end up underwater and the U.N. says 9 out of 10 African farmers could lose their ability to grow food. Wouldn’t a real solution benefit these people instead of just polluters?”
Odd. Is this even relevant? Or is it just a sneaky innuendo that a cap on carbon would not benefit the African farmers (and others in the Third World) whose livelihoods are threatened by climate change?
In fact, the best thing we can do is put the brakes on climate-changing emissions post haste. Then we should figure out how to help people adapt to the changes that are already inevitable. Luckily, cap-and-trade provides an excellent framework to do both of these things. That’s what the coming summit in Copenhagen is all about.
“..operators of a polluting factory can claim they were planning to expand 200 percent but reduced the plans to expand only 100 percent. For that meaningless claim, they get offset permits — permits that they can sell to someone else to make more pollution!”
Deception. She selectively cites a few instances of nutty-sounding abuses in one particular carbon offsets program and then conflates them with offsets generally. (Dave Roberts has a nice treatment of this in his post on the video.) But this one is a bridge too far. The cap-and-trade proposals in Congress would not allow this kind of thing. In fact, they go to great lengths to specify exacting standards for offsets — and this kind of thing is wildly out of bounds.
I’m not a fan of offsets. They may turn out to be a good thing, but they do worry me a lot. Still, they are a problem for any carbon policy. They will plague carbon taxes, regulation, or voluntary action just as they do cap-and-trade. So if you’re worried about offsets, as I am, the logical thing to do is to try to reduce their role and tighten the standards used to certify them.
“We’re not even close to a global agreement on a carbon cap to begin with…”
Deception. Europe has a cap on carbon and the United States is very close to having one (and Canada will follow the U.S.’s lead). So that will cover all of the world’s largest contributers to the problem of climate change. Many other nations, including some of the big dynamic developing countries, have said they will consider a carbon cap if the rich countries lead. Forging a global agreement on a carbon cap is what the big summit in Copenhagen is about.
“…we’re putting the cart before the horse and rushing off to trade schemes and offsets.”
False. Cap-and-trade puts things in the right order. To wit, it puts a cap on carbon emissions — something that no other carbon policy does. Other policies, like carbon taxes, are more concerned with setting a price on carbon put are perfectly happy to let the market determine how much carbon is emitted. (Also, what does it mean to “trade schemes”?)
“We don’t need to let these guys design the solution…”
Deception. “Thes guys” (the Wall Street guys, according to her video), did not design the solution. Cap-and-trade was pioneered by the U.S. Environmental Protection Agency where it proved to be remarkably successful. It’s since been rolled out successfully for numerous air pollution programs, a carbon cap-and-trade system in Europe (successfully) and a carbon cap-and-trade system in the northeast U.S. (also successfully).
Go EPA go! Cap that carbon!
Confusion. Letting the EPA cap carbon should be a last resort. Enacting a cap based on regulatory fiat is almost sure to be the more expensive and unfair way to do it. Command and control regulation would create arbitrary winners and losers, raise prices for consumers, and lack mechanisms to address equity concerns.
Unless, that is, the EPA did what it’s good at doing: enact a cap-and-trade program. Now that’s something I could support.
“…a U.S. cap-and-trade law proposed in 2009 guts the Clean Air Act…”
False. The cap-and-trade laws in Congress do not “gut” the Clean Air Act. (Interestly, this claim is actually not cited in the transcript; or rather, there’s a citation but it is supporting an unrelated claim in the next paragraph.) It is possible that U.S. federal law will reserve carbon reduction for new comprehensive energy and climate laws — the laws that include cap-and-trade — but the EPA will retain all of its authority to do everything that it has been doing since its inception. The only thing the EPA might lose — and I say “might” — is its ability to manage carbon policy, an ability that it has had for less than a year.
“…cap-and-trade makes citizens think everything will be okay if we just drive a little less, change our light bulbs and let these guys do the rest.”
Deception. And a classy one at that. It’s true that cap-and-trade takes a comprehensive approach to climate change, rather than relying on small-bore individual actions that have, to date, proved totally inadequate to addressing climate change. That’s a good thing. But to be successful, cap-and-trade will likely need the support of dozens or hundred of complementary policies — the very sorts of things that are included in the current legislation in Congress.
Moreover, cap-and-trade does nothing to allay anyone’s concerns about adapting to the climate changes that are already inevitable. It may, however, provide some much-need funding to address these problems.
“These cap-and-trade proposals are mostly about protecting business as usual.”
False. Cap-and-trade is about fundamentally changing the current energy economy away from fossil fuels and toward clean energy, efficiency, and conservation. There’s no other policy that’s so far-reaching in its scope, especially when one considers the other important components in the energy and climate bills in Congress.
“Right now, the U.S. subsidizes fossil fuels at more than twice the rate of renewables. What? We shouldn’t be subsidizing fossil fuels at all!”
Deception. Cap-and-trade would, in effect, put a price on fossil fuels, thereby reducing their net subsidies. It also provides a revenue stream that can be directed toward subsidizing renewable energy.
“I know we’d all love to sacrifice nothing, save the planet and get rich doing it.”
“We can’t solve it with the mindset — their mindset…”
Classy. And this is how the piece wraps up, with what passes among progressives for name-calling and taunts. Needless to say, this stuff has pretty much nothing at all to do with cap-and-trade. There are no real solutions offered in the video, nor anything other than bromides that we can’t “get rich” saving the planet.
For a more credible assessment of cap-and-trade, let me suggest Sightline’s Cap-and-Trade 101: A Climate Policy Primer. For more on the bills in Congress, please see Alan’s excellent post on the Waxman-Markey bill, which passed the House last summer, and my roughed-in notes on the Clean Energy Jobs Act that’s now in the Senate.
This post originally appeared at Sightline’s Daily Score blog.
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