It might be possible to fashion a piece of legislation that will significantly reduce global carbon emissions just as it may be possible to build a space craft that will carry human beings to new star systems. But no one alive knows how to do either thing. The laws of physics make the latter very difficult to conceive of. The laws of politics make the former look almost as impossible.
Even if the developed world were to effectively reduce greenhouse gas emissions enough to make a difference, that would only result in the shifting of world economic production to places like China and India, and maybe Brazil. It would do no more than slow down the trajectory of modern economic development.
But the developed world is going to do no such thing. The United States may be about to institute a cap and trade policy which, if it works as planned, would make cheap sources of energy expensive and thus encourage the development of green technologies. This has been tried in the European Union on a big scale, and so far it has come a cropper. Technology Review has a fine piece on the European experience in its August 2009 issue. Unfortunately, it is not available online for free, so I had to resort to the crude business of actually buying the magazine. So that you may be spared that indignity, I will sum up the article.
Cap and Trade works by issuing credits to industries for the carbon they emit. In theory, the total number of credits will be low enough to force a reduction of emissions over the total economy. That's the cap part. Virtuous industries that adopt green technologies will have credits left over, which they can sell to firms that, for lack of virtue or some other reason, cannot cover their emissions with their allowance. That's the trade part. The trade system is intended, reasonably enough, to make the system flexible to adjust to economic realities.
What actually happened is that European governments caved in to pressure from their various constituencies (including powerful unions) and issued so many allowances that they exceeded the carbon that was actually produced. No net reduction in greenhouse gases was achieved. That is not to say that the policy did nothing.
Most EU states gave extra allowances to heavy industries such as cement and steel, because they didn't want to threaten the manufacturers' international competitiveness; by the same states gave relatively few allowances to producers of electricity.
The result was a system that favored heavy polluters (if you consider breathing out pollution), but hurt Europe's consumers by raising their electric bill. If the EU couldn't make the system work when economies were generally growing, there is much less chance it will work now that economic growth has stalled.
Congress could, of course, benefit from the example of Europe. What Congress is actually doing looks like exactly the same thing. My grad school buddy Steve Hayward has a piece co-written with Kenneth Green on the Waxman-Markey bill, at the American Enterprise Institute website.
Waxman-Markey is a bundle of contradictions. It seeks to make carbon energy more expensive but does not ask consumers to pay higher energy prices--at least for the first decade of its operation. Hence, Waxman-Markey allocates 85 percent of the emission rights it creates to existing emitters (coal-fired power plants, electric utilities, and manufacturers) for free, rather than auctioning the emissions permits, as President Obama and environmentalists have long advocated. It seeks a first in economic history: rationing without scarcity or price inflation. Thus, Waxman-Markey allows generous "offsets" so that carbon-based energy does not, in fact, become scarce. The bill does, however, contain a multitude of new regulations, product-efficiency mandates, and spending programs that will require extensive managerial attention from both the public and private sectors, though to much less effect than promised.
That sounds better than the European version, at least where consumers are concerned. Otherwise, it looks like the same bag. All the tough parts are pushed into the distant future. All that is achieved in the near term is an expansion of the bureaucracy and a series of market distortions.
If the means look limp, the aims of Waxman-Markey are breathtakingly ambitious. The bill aims to reduce U.S. CO2 emissions from about 6 billion tons (2005) to about 1 billion tons by 2050. The last time the U.S. produced CO2 at such a level was 1910. Since then, the population has more than tripled, and the economy is twenty five times larger. Hayward and Green point out that the Waxman-Markey goals would mean CO2 emissions of 2.4 tons per person in 2050. When did we last belch out carbon at that rate? 1875. To find such rates of emissions today, look to such advanced places as Grenada and Belize.
This is nonsense on green stilts. The aims of the legislation are untethered from reality, and its means have been demonstrated to be ineffective in achieving those ends. Such is one of the signature pieces of legislation in the current Congress.