Cap and Trade

[Schtank]

So enviromentalists are always talking about cap & trade. I'm pretty well convinced that its a horrible idea (both because enviromentalists support it and because anytime the free market is "capped" things go bad and rights are violated). But could you all please tell me more about cap & trade? I'm curious about what it is specifically. Once I know more about it I should be able to extrapolate a more education opinion about it. Thank you so much; and links to helpful websites/articles would be much appreaciated.

[eficazpensador]

You should really google it. Here is a good article explaining why you ought to be wary of any environmentalist B.S.

http://www.aynrand.org/site/News2?page=New...ws_iv_ctrl=2457

[Juxtys]

Enviromentalists want to improve the use of solar and wind power by that tax. Such a tax in Lithuania has always existed, but there ain't many solar nor wind power plants here

[softwareNerd]

... cap & trade? I'm curious about what it is specifically.

In essence, the system caps (i.e. limits) the total amount of X (fill in any assumed pollutant here). That is the starting point.

Next, you create polluting rights up to the amount of the limit (say it is 1 million units of X). Nobody is allowed to pump out a unit of X unless they have acquired 1 X polluting right. A factory that wants to spew 145 units of X must have acquired 145 units (or more) of X polluting rights.

Finally, the rights can be traded. So, a factory that has 145 X polluting rights but realizes that it only needs to pollute 125, can sell the remaining 20 rights to someone else.

There are many variations within this framework. For instance, the total amount of rights may vary over the years, either growing or shrinking. Or, there may be examples of "pollutant" production that are completely exempt (for instance, if carbon-dioxide is being regulated, humans may be allowed to breath without first acquiring a right to do so). There can be various rules about how the rights are acquired in the first place: for instance, large existing polluters may be given such rights "free" based on their current output of X, or they might pay a fee that is lower than someone who doesn't already spew out X, or they may get no such benefit from being a pre-existing polluter. The ability to trade may be subject to various rules. The rights themselves may be construed in various ways (e.g. the right may be valid for different durations).

In the abstract, Cap and trade is simply another way of establish formal property rights. It mimics the methodology of (say) land-ownership. If there is a real problem, requiring a real limit on some pollutant, then it makes sense to tackle it by establishing a right to pollute as if it were a valuable resource.

The trillion dollar question is whether there should be any such limit in a specific case. For carbon-dioxide, the answer is no.

Edited July 3, 2009 by softwareNerd

[AllMenAreIslands]

... humans may be allowed to breathe without first acquiring a right to do so...

Emphasis mine.

I wonder if they'll take a page out of China's book and start forcing people to have abortions if they already have a child or two.

[D'kian]

The cap and trade explanations always remind me of the railroad bond "de-freezers" in AS.

[sanjavalen]

In essence, the system caps (i.e. limits) the total amount of X (fill in any assumed pollutant here). That is the starting point.

Next, you create polluting rights up to the amount of the limit (say it is 1 million units of X). Nobody is allowed to pump out a unit of X unless they have acquired 1 X polluting right. A factory that wants to spew 145 units of X must have acquired 145 units (or more) of X polluting rights.

Finally, the rights can be traded. So, a factory that has 145 X polluting rights but realizes that it only needs to pollute 125, can sell the remaining 20 rights to someone else.

There are many variations within this framework. For instance, the total amount of rights may vary over the years, either growing or shrinking. Or, there may be examples of "pollutant" production that are completely exempt (for instance, if carbon-dioxide is being regulated, humans may be allowed to breath without first acquiring a right to do so). There can be various rules about how the rights are acquired in the first place: for instance, large existing polluters may be given such rights "free" based on their current output of X, or they might pay a fee that is lower than someone who doesn't already spew out X, or they may get no such benefit from being a pre-existing polluter. The ability to trade may be subject to various rules. The rights themselves may be construed in various ways (e.g. the right may be valid for different durations).

In the abstract, Cap and trade is simply another way of establish formal property rights. It mimics the methodology of (say) land-ownership. If there is a real problem, requiring a real limit on some pollutant, then it makes sense to tackle it by establishing a right to pollute as if it were a valuable resource.

The trillion dollar question is whether there should be any such limit in a specific case. For carbon-dioxide, the answer is no.

SNerd, are you saying that you support the idea of Cap & Trade in principle, but not in a specific implementation that classifies carbon dioxide as a pollutant?

[softwareNerd]

SNerd, are you saying that you support the idea of Cap & Trade in principle, but not in a specific implementation that classifies carbon dioxide as a pollutant?

Yes, as long as my meaning is clear. An analogy would be that I "support" addition, multiplication and so on, even though I do not support their use on my tax-form.

Cap and trade is just a modern name for a particular way to implement property rights. Many (most?) actual implementations are not warranted, because there should be no cap in the first place. Taxi-licences are a good example of a bad usage. There is no legitimate reason for a government to limit the number taxi-cabs. So, each owner ought to have the right only to his own cab, and any new owner should be allowed to buy new cabs and run them, even if it affects the business of existing owners. They have no right to protection from new competitors. The licencing system caps the number of cabs in the city, and lets owners trade their licences. Cap and trade is simply a new name for a licencing regime.

A licence is a governmental permission to do something. It is a right under law (as opposed to a legitimate right). In general, a right under law may or may not be legitimate. For instance, people living along a river can have the government formally recognize certain water-access and water-usage, and such rights could be legitimate. When there are few users, there is no issue. However, when there are many, there is a need to formalize the water-related rights. One may legitimately end up with a system that recognizes the right of each person to draw a certain amount of water from the river, with restrictions on dams, and so on. The trickiest part is when the system gets started. The way such systems typically evolved is that they allowed pre-existing users to use what they were already using. In essence one is documenting pre-existing rights in the form of a formal document (much like a title to land). So, they recognized their existing "informal" rights to usage, and formalized them. Sometimes there would also be a prescribed method by which new comers could establish similar rights (say along a part of the river that was not yet inhabited). Such a system could also allow the rights to be sold. If a particular farmer wanted to stop taking water from the river, he could sell his water-rights (or some portion of them) to someone else. This is no different from a transfer of title. The system is not dissimilar to the conversion of commons-lands into informally-titled land.

The underlying assumption, on which everything is based, is that their ought to be a formally recognized right in a particular case. With taxi-cabs, the answer is no. With carbon output too.

[Eiuol]

Emphasis mine.

I wonder if they'll take a page out of China's book and start forcing people to have abortions if they already have a child or two.

From what I know about China, women aren't forced to have abortions if they get pregnant when they already have a child, in the sense the cops won't come to their home and do a forced operation. I believe families are fined such an extraordinary amount for having more than one child that having more than one is a bad idea. It is still force, of course. In a way, Cap and Trade is the same thing. You may break the rule, but prepared to be heavily fined. It's just a "nice" form of force.

[Schtank]

Hmmm, thanks for the input everybody. Cap & trade always seemed like a violation of property rights to me, but I guess I'm mistaken. Maybe I'll do mroe research on it; because I still don't think I know enough.

[Trebor]

In the abstract, Cap and trade is simply another way of establish formal property rights. It mimics the methodology of (say) land-ownership. If there is a real problem, requiring a real limit on some pollutant, then it makes sense to tackle it by establishing a right to pollute as if it were a valuable resource.

Cap and trade is just a modern name for a particular way to implement property rights.

I'm afraid that I have to disagree with you, softwareNerd.

The only proper restriction on man-made polution is indivdual rights. One individual's rights end where another individual's rights begin.

Polution is only a concern, with respect to rights, to a proper government, if it is a violation of some individual's rights.

If one's pollutants do not negatively impact the rights of other individuals, then there's no problem, nothing to address, nothing to resolve, no rights violations.

To talk about trading "polluting rights" is the same as to talk about trading rights-violating rights. It's like talking about trading murder-rights as another manner of implementing individual rights. It flips the principle of individual rights on its head.

"Cap and Trade" (from the little I understand of it which includes how you've described it) is not simply another way of establishing or implementing formal property rights; it's a total rejection of property rights, on principle, and the acceptance of collectivized rights, on priniciple. The same holds for licensing. Licensing is not an alternative implementation of rights, it's a rejection of rights in favor of permissions from the collective, on principle.

[Edit spelling.]

Edited July 3, 2009 by Trebor

[FeatherFall]

To talk about trading "polluting rights" is the same as to talk about trading rights-violating rights. It's like talking about trading murder-rights as another manner of implementing individual rights. It flips the principle of individual rights on its head.

I understand where you are coming from. If a regulatory agency simply fines someone for breaking a law, it can amount to paying the government for permission to violate someone else's rights. But that's not necessarily the case for cap and trade. If there is a pollutant that is harmless in small quantities, but harmful in larger quantities, then cap and trade makes sense, especially if it is an air or water-table pollutant that can't be sequestered.

Edit: The issue here is whether or not CO2 is a pollutant. I think there might be some impact on ocean acidity, but as far as global temperatures are concerned, it is not a pollutant. Current cap and trade proposals are designed to effect the climate, not the ocean.

Edited July 3, 2009 by FeatherFall

[themadkat]

The issue here is whether or not CO2 is a pollutant. I think there might be some impact on ocean acidity, but as far as global temperatures are concerned, it is not a pollutant. Current cap and trade proposals are designed to effect the climate, not the ocean.

Agreed, I don't see anything wrong with cap-and-trade in principle, especially if it's applied to something like fishing rights among a local group of fishermen (this would be a contractual agreement between them, not a legislative act). The issue is what is being capped and traded, and in the case of both CO2 and taxi licenses, those are not things that should be morally capped.

[Eiuol]

Agreed, I don't see anything wrong with cap-and-trade in principle, especially if it's applied to something like fishing rights among a local group of fishermen (this would be a contractual agreement between them, not a legislative act). The issue is what is being capped and traded, and in the case of both CO2 and taxi licenses, those are not things that should be morally capped.

Cap and trade applied to fishing rights would mean you can only harvest X amount of fish unless you acquire additional permission, such as by buying other another person's permission. It can be useful for dealing with extreme risk of scarcity and when it is 100% voluntary. It can be in a fisherman's interests to only fish a certain amount so that the fish population can grow. But CO2 emissions have nothing to do with scarcity. The only "cap" should be that you can't damage another person's property.

There is no "set" limit to when something becomes a pollutant. If something is a pollutant, it causes damage (whether it be environmental, property or medical). 500ppm of evilGas might be enough to give me breathing problems, but 500ppm of evilGas might do nothing to you. To me, it's a pollutant. To you, it isn't. All that really matters is: "Did this substance cause damage?". You cannot set up an objective cap in regards to pollutants without saying something like "if you hurt one person, you hurt every person". Without a specific context, pollutant is a word to avoid.

I guess the only issue I have is people say they agree with cap and trade on principle. The principle of the legislation is clearly to grant you permission to emit CO2 in order to take a pro-active approach to saving the world.

[Trebor]

The individual should not be punished for consequences that can occur only as the result of the actions of the broader category or group of which he is a member, but do not occur as the result of his own actions. Thus, even if it is true that the combined effect of the actions of several billion people really is to cause global warming or ozone depletion (neither of these claims has actually been proven—the claims of global warming have all the certainty of a weather forecast, extended out to the next 100 years!), but even if, as I say, the claims were true, it still would not follow that any proper basis existed for prohibiting any specific individual or individuals from acting in ways that only when aggregated across billions of individuals resulted in global warming or ozone depletion or whatever.

If global warming or ozone depletion or whatever, really are consequences of the actions of the human race considered collectively, but not of the actions of any given individual, including any given individual private business firm, then the proper way to regard them is as the equivalent of acts of nature. Not being caused by the actions of individual human beings, they are equivalent to actions not morally caused by human beings at all, that is to say, to acts of nature.

Once we see matters in this light, it becomes clear what the appropriate response is to such environmental change, whether global warming and ozone depletion, or global cooling and ozone enrichment, or anything else nature may bring. It is the same as the appropriate response of man to nature in general. Namely, individual human beings must be free to deal with nature to their own maximum individual advantage, subject only to the limitation of not initiating the use of physical force against the person or property of other individual human beings. By following this principle, man will deal with the any negative forces of nature resulting as byproducts of his own activity taken in the aggregate in precisely the same successful way that he regularly deals with the primary forces of nature.

Environmentalism in the Light of Menger and Mises by George Reisman

[softwareNerd]

The individual should not be punished for consequences that can occur only as the result of the actions of the broader category or group of which he is a member, but do not occur as the result of his own actions...

This is a flawed argument. There is no collective. it is individual men who act, and these individual men must be responsible for their actions.

I visualize a lawyer arguing that each conspirator who stabbed Caesar should be tried only for assault, because no single stab wound was bad enough to kill him.

I think the real basis should be found in: the objectivity and proof of such harm, the time-span across which such harm is reasonably certain, the degree of such harm, the general (as opposed to person-specific) nature of such harm, pre-existing conditions and usages, ... and related issues. Global warming and ozone depletion will probably fall down on the first hurdle itself.

Edited July 3, 2009 by softwareNerd

[The Lonely Rationalist]

SNerd, I have 2 questions about what you've said here:

How would the government decide how many X-polluting rights each company would get per year?

Wouldn't your system allow unscrupulous businesses to cut back on production, so that they have more X-polluting rights to sell, thus holding the productive companies hostage?

[softwareNerd]

SNerd, I have 2 questions about what you've said here:

How would the government decide how many X-polluting rights each company would get per year?

Wouldn't your system allow unscrupulous businesses to cut back on production, so that they have more X-polluting rights to sell, thus holding the productive companies hostage?

Just to be clear, I do not support a system of cap and trade for so-called greenhouse gases. I do not support any type of control on such gases.

Nevertheless, I don't understand your example. If a widget-maker sold 100 units, it would be bought by a plodget-maker. One would end up with less widgets and more plodgets. I'm not sure how anyone is being held hostage, and in what sense?

Edited July 3, 2009 by softwareNerd

[The Lonely Rationalist]

Just to be clear, I do not support a system of cap and trade for so-called greenhouse gases. I do not support any type of control on such gases.

Nevertheless, I don't understand your example. If a widget-maker sold 100 units, it would be bought by a plodget-maker. One would end up with less widgets and more plodgets. I'm not sure how anyone is being held hostage, and in what sense?

Let me try to make a clearer example:

It is discovered that chemical XYZ is harmful in large amounts. Now let's assume the government sets the cap at 1000 polluting units for chemical XYZ, and gives Company A 200 units. Before the law was enacted, Company A used 300 units per year.

Now what's to stop an individual form forming a Company B, getting their units, but barely producing anything and instead making their profits by selling their extra units to company A? Or, for that matter, in Companies C, D, and E, all of whom already existed, from stopping production and instead making their profits by selling their extra units to Company A?

It seems like such a scenario would be like an extra tax on productive businesses and a reward for non-productive companies.

I hope that's clear.

[softwareNerd]

... what's to stop an individual form forming a Company B, getting their units, ...

The law would have to be written in a way that disallows this.

[The Lonely Rationalist]

The law would have to be written in a way that disallows this.

Do you have any ideas as to what basis the government would decide how many units to give out to each company? Or does it still need to be figured out?

[softwareNerd]

Do you have any ideas as to what basis the government would decide how many units to give out to each company? Or does it still need to be figured out?

I'm not sure if you're asking about the planned legislation, or just hypothetically.

Hypothetically, the first step is to recognize and formalize existing rights, that people already exercise. By that token, Company A currently has a pre-existing right that is already recognized by law, and Company B does not. More accurately, Company A exercise the right, while B does not. So, the first step would be to recognize the rights that are already being exercised. It's similar to saying that people who are already drawing water from a river now have a formally-specified (yet newly delimited) right to do so.

Edited July 3, 2009 by softwareNerd

[fountainhead777]

I still am not sure how an Objectivist system can apply any kind of government control to the free market. Now if a group of companies set up an agreement amongst themselves to limit their pollution and publicize it so that consumers may take it into account that this company limits their pollution; that seems plausible and justified. Compulsion of any nature does not seem advisable and even if its still voluntary, chances are it would work better without government involved.

[Trebor]

This is a flawed argument. There is no collective. it is individual men who act, and these individual men must be responsible for their actions.

I visualize a lawyer arguing that each conspirator who stabbed Caesar should be tried only for assault, because no single stab wound was bad enough to kill him.

Each conspirator who stabbed Ceasar acted as an individual, even if as a group of individuals, as a collections of individuals (a "collective" no less), for the purpose of killing Ceasar. When the job was done, they were finished with what they each had set out to do.

Each of them as individuals is responsible for the death of Ceasar. Each is a murderer. That any particular actors efforts did not deliver the fatal wound does not matter.

That is nowhere near the same as the inadvertent death, for example, of an individual from heat stroke suffered as a result of the loss of power for their AC due to overload in the power system during a heat wave in which most everyone had increased their power usage to stay cool by running their air-conditioners and saying inside.

Who is responsible for causing that death? Who do the lawyers go after?

Everyone on the grid? How about the last person to turn on his AC, the person whose action proved to be the final straw that overwhelmed the power system? (Assuming one person's use could be the final straw.)

Just to be clear, I do not support a system of cap and trade for so-called greenhouse gases. I do not support any type of control on such gases.

For what do you support a system of cap and trade? Why?

[AllMenAreIslands]

This is a flawed argument. There is no collective. it is individual men who act, and these individual men must be responsible for their actions.

Indeed individuals act individually and must be held accountable for their actions. However, what term can we use other than "collective" or "collectively" to refer to a risk that only arises cumulatively?

Example: let us accept for a moment that refrigeration equipment does produce some negative effects. For one thing, refrigeration confers a great many benefits, so it would take a high level of negative effects to make action worthwhile. But let's say the negative effects are measurable. One could not blame a single individual; rather we could all be said to be to blame. Individually we all enjoy the benefits of refrigeration but at the individual level there isn't enough damage to be actionable. It is only the cumulative effect of many individual choices that results in the problem. In such a situation, I would agree with George Reisman's view that such cumulatively caused risks are best regarded as acts of nature. Individuals must be left free to deal with them and to find solutions.

The cap & trade scheme/legislation is held to be "the answer" precisely because it is said to be everyone's problem. Everyone is to blame because our modern lifestyle is to blame. "Too much" CO2 is in everyone's interests to fix. And since everyone knows this scheme will cause prices to rise generally, we should all be happy to pay more because "somehow" the increased prices will "combat CO2" as well as "fix climate change." This view owes much to belief in the intrinsic value of nature as well as to the bizarre persistence of the belief that government is the entity that ought to fix this kind of problem.

In this case, a rush to judgment (and action) by government will end up destroying many lives by pricing technology out of most people's ability to pay. All this for the sake of a negligible negative. The assertion of collective wrongdoing in the case of CO2 ignores both the lack of evidence that CO2 has a harmful effect on the environment as well as the growing evidence that causes other than man's activities are primarily responsible for CO2 levels.

But even if it were true that our modern lifestyle is to blame for adverse CO2's (or some other substance's) consequences, I do not see how a government-run scheme would or could fix it. Such a demand ignores the mountain of evidence of governmental failure every time it has undertaken projects of this kind. Infrastructure such as roads, bridges and utilities; essential services like education, health care and garbage pick-up; long-range planning activities such as money for old age or in the event of unemployment have all been made the subject of government intervention. These highly important issues are said to be too important to be handled by individuals on their own behalf. Government must step in. It then usurps the decision-making and expropriates vast sums, proceeding to play at problem-solving. The projects are begun with great flourish and then left to flounder when another project is suddenly deemed more important.

The result is non-action and waste. Issues and concerns remain, only now people no longer have the resources to address them. If people really care about cleaning up actual pollution, the entity they should NOT entrust the project to is the government.

Why should this CO2 situation or a sulphur situation or indeed any pollution situation be different from any of the other grand projects? The short answer is, it won't be because it can't be. The nature of government precludes its success in the same way and for the same reasons as it precludes its success in trying to coordinate the marketplace.

In the case of carbon dioxide, conclusive proof does not even exist yet that it is harmful to us. Furthermore, even if it were eventually proven to be harmful, evidence supports the conclusion that CO2 levels are caused by factors other than man's activities. Either way, destroying our individual ability to improve and reshape the world is destroying our ability to find a way to effectively combat climate change, pollution or any other real problem. Imaginary problems should most definitely not be the subject of such confiscatory legislation. Government should not initiate force for ANY purpose including to fix alleged pollution issues.

There is absolutely no justification for this scheme. If there is no problem, then there is no need for such a heavy-handed solution. But more importantly: if there is a real problem, the government is incapable of solving it. All it does is waste the resources thereby creating a bigger problem than if nothing had been done at all. Individuals should be left alone to work these matters out for themselves, between and among themselves.

When an individual can be identified as contributing measurable pollution all on his own (or just his factory/business), then the proper recourse is for those affected to take him to court.

* * *

From what I know about China, women aren't forced to have abortions if they get pregnant when they already have a child, in the sense the cops won't come to their home and do a forced operation. I believe families are fined such an extraordinary amount for having more than one child that having more than one is a bad idea. It is still force, of course. In a way, Cap and Trade is the same thing. You may break the rule, but prepared to be heavily fined. It's just a "nice" form of force.

Fines are more frequent now. In other words, things have relaxed in the last few years, but during the more stringent application of the law, there were forced abortions and all kinds of infanticide (by parents as well as by "authorities.")

Here's one link.

Edited July 4, 2009 by AllMenAreIslands