Carbon offsets, those new financial products created in large part by the likes of Enron and Goldman-Sachs are on your store shelves now. Hurry before they’re all gone! Buy 10 and get one free! Call in the next 5 minutes and we’ll send you bottled water from your choice of Louisiana, Alabama, Mississippi and Florida!
The buying of carbon offsets is a practice that the public needs to stay informed about lest we get lulled down another blind alley by Wall Street marketers who seek to find financial products that can be exploited in the marketplace and lead to economic ruin for many unsuspecting investors. Carbon offsets, as currently designed, are tilted in favor of the industry that all too often seeks profits and financial gain over sound investment and the public interest.
Let’s be clear; the idea of carbon offsets in and of itself is not a bad idea. It’s just that when market forces are utilized to determine the outcome of such products, especially without any government oversight, there is always the inevitability that a few greedy people will mishandle the program in a way that leaves the public high and dry. Unless you have short-term memories we all know how Wall Street traded their souls and toxic assets that sent the U.S. and ultimately the world economy into a tailspin.
Carbon offsets are merely certificates issued by the federal government that allow people who purchase them to continue doing business as usual where CO2 emissions are involved. As the name implies when a party buys an offset they are paying for the right, temporarily at least, to continue emitting CO2 and other green house gases (GHGs) into the environment while paying someone else to reduce their own carbon foot print. Caps are set so as long as the offsets promote overall reductions in GHGs to stay under the caps the hope is that our carbon foot print and our dependency on foreign oil will safely diminish.
As polluting industries pay for these offsets they are “pressured” through market forces to lower their emission rates to keep costs down that ultimately get passed on to the consumer. When and if they do, any offsets they still hold can be sold to other industries that have yet to convert to cleaner alternative energy sources.
A part of the plan for the government selling these offsets is to raise revenue to invest in green energy technology as opposed to using taxpayer revenue. This green energy investment goes to private sector interest and research entities to develop and devise cleaner energy capabilities to slowly wean the nation off of the dirtier fossil fuels.
“Cap and trade” is the name of the policy that would deal with offsets. As it stands now there is currently a House version in Congress within Climate Change legislation that was passed last summer and waiting for the Senate version under Senators Kerry, Lieberman and Graham to come to fruition so it can be sent to a joint session where hopefully a reasonable compromise will be hammered out and the President can sign it. There are problems however that could derail this legislation.
Senator Graham has withdrawn his support for political reasons which will surely make it difficult to get some Republican support and pass the bill with a 60-vote margin to avoid any filibuster. There is also the problematic issue with the cap and trade element being absent in the Senate version of climate change legislation. Opponents of cap and trade on the right see it as a tax while some on the left feel that its application will benefit Wall Street and hurt consumers. It is feared that needed climate change legislation will not pass if cap and trade is part of the bill.
The opponents on the right who claim it is a tax on the American consumer are really legislators who are in the back pockets of Big Oil and Big Coal. They promote an unrealistic view that this is going to hurt more people than it will help; an effective emotional hot button used by pro-corporate legislators to curry favor with their corporate donors and give the appearance that they are fighting for lower taxes, jobs or both for their constituents back home. The reality is that greener technologies are the future and any conversion from fossil fuels to cleaner alternates is inevitable.
Higher costs will initially be incurred as we convert from dirtier fossil fuels to cleaner sources. This just cannot be avoided. In the long run however overall energy costs for consumers will decrease as cheaper wind, solar, thermal and bio-fuels take over the power grids of this country. Other consumer expenses will also decrease as cleaner energy sources take over, such as health care costs resulting from improved air and water quality and fuel expenses as vehicles convert from combustible engines to electric ones. There is also the added dimension that new jobs for the new technology will replace those unhealthier ones in the fossil fuel industries.
But unless we have a realistic cap and trade policy that seriously reduces carbon emissions over the next few decades, time and money will be lost to prevent the cataclysmic results of global warming rapidly changing because of our use of oil and coal. Trading carbon offsets must not become the sole domain of big financial interests.
If the cap and trade policies that ever make it out of Congress and become the law of the land do not regulate the issuance of offset certificates, the opportunity for corruption will exist. Already there are abuses in some areas of the global economy where offsets are being sold without confirming trade-offs of reduced CO2 emissions. Businesses lying about their efforts to reduce their carbon foot print is not being assessed by public oversight, yet government agencies continue to issue offset certificates to the private sector.
The cap and trade plan in the U.S. Senate version doesn’t even want to sell the first few million certificates to polluting industries in order not to hurt the profit margins of existing polluters. They would actually dispense them for free. The status quo is already a leg up with this idea. Unless tight regulations are put in place and meaningful costs for offset permits are established, the same polluting practices could go on for years while those who handle the certificates, in the private and public sector, make off like bandits at tax payer expense.
In place of the offsets being sold under a cap and trade policy (critics of this approach call it “cap and giveaway”) there is a better practice of issuing carbon offsets known as “fee and dividend”. It is the idea of several groups that include renowned climatologist Dr. James Hansen. In his NY Times Op-ed piece on this Dr. Hansen explains that instead of issuing free carbon offsets to private industries or expecting the invisible hand of the market to work its magic, we should by-pass the Wall Street middle-man and tax the carbon emitter at the source.
“A gradually rising carbon fee would be collected at the mine or port of entry for each fossil fuel (coal, oil and gas). The fee would be uniform, a certain number of dollars per ton of carbon dioxide in the fuel. The public would not directly pay any fee, but the price of goods would rise in proportion to how much carbon-emitting fuel is used in their production.
All of the collected fees would then be distributed to the public. Prudent people would use their dividend wisely, adjusting their lifestyle, choice of vehicle and so on. Those who do better than average in choosing less-polluting goods would receive more in the dividend than they pay in added costs.” (Cap and Fade by James Hansen, NY Times, 12/6/09)
There is a right way and wrong way for buying and selling carbon offsets that work for the public good. It is a sound idea that when put in place (soon hopefully) carbon emissions and the release of other green house gases that threaten our planet can be reduced in time to minimize the impact hotter temperatures around the globe will cause. The for-profit approach that allows the people who brought us the Great Recession of 2008 is clearly the wrong way.
Cap-and-trade will Make the Climate Problem Worse, Not Better
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