Cap and trade: the conservative solution
By Andrew Hedlund July 18, 2010 at 4:20 pm 
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As of late, this country has seen only the bad side of a bad market – bankers and their record bonuses as well as thousands of foreclosures. If the ingenuity and innovation it takes to succeed is harnessed and put to good use great things can happen.
An excellent example was the approach President George H.W. Bush took to reduce acid rain emissions and toxic air quality. Passed with towering, bipartisan majorities in Congress and signed by a Republican president, the Clean Air Act Amendments of 1990 was a cap-and-trade system that provided economic incentives to companies to cut down smog emissions and instituted an acid rain allowance-trading program.
Cap and trade, which is an idea based around the free market, is not a radical, left wing idea. Rather, it is something both parties have historically embraced. The Clean Air Act Amendments of 1990 was passed with near unanimous support in both chambers of Congress.
The bill passed in the House of Representatives with a vote of 401-25 and cleared the Senate with a comfortable margin of 89-10. Achieving monstrous majorities such as these is near impossible today given the polarized electorate.
What’s more is that this program achieved results. The acid rain cap-and-trade program achieved 100 percent compliance in its goal of reducing sulfur dioxide emissions. And for fiscal conservatives, the net result of this legislation was a dream come true. It was estimated to cost $6 billion, but only ended up costing a fraction of that, between $1.1 and $1.8 billion.
The passage of the legislation was hailed by then EPA administrator, William K. Reilly. In a press release he said, “The final result is a law which will undoubtedly serve as a model for regulatory reform across the board, leading to the widespread use of market approaches here and abroad.”
Now we must use this successful program as a means to bring down carbon emissions. It has a bipartisan appeal – aspects of it align with both the conservatism and liberalism ideologies.
Cap and trade appeals to one of the cornerstones of conservatism, where the private sector acts as the engine that drives this country’s economy and provides the innovation that America has become known for. It also appeals to the liberal ideal of protecting the environment.
Such a successful program should not be shunned as a job-killing, radical idea. On the contrary, a cap-and-trade program that has the authority necessary to regulate carbon emissions has the potential to revolutionize the green energy industry and produce millions of jobs in the areas such as research, construction and installation.
Though the media and fringes of both parties like to pretend this country has a one-way ticket to Doomsday, this is not the case. If we approach the negotiating table with an open mind, this country’s best days lay ahead of it.
However, if the partisan bickering continues, many of the issues that need to be addressed will not be solved, rather rifts of mistrust and hard feelings will develop that could take years to mend.
It is our duty to leave this Earth better for our children and grandchildren and we can do this by pursuing policy that works. History has shown that cap and trade can be successful. Let’s put policy before politics and institute a program that caps greenhouse gases. In doing so, we will rely on the free market and the American entrepreneurial spirit to revolutionize an industry and show to the world once again why America is home to some of the most creative minds in the world.
Andrew can be reached at andrew.hedlund@asu.edu.
Tags: cap-and-trade Democrat President George H.W. Bush Republican
Cap and trade policies are the result of people who do not understand economics attempting to appeal to the least common denominator of those who claim to understand “the free market,” but do not.
The most obvious fallacy is that you claim to allow the invisible hand to guide the free market, setting voucher prices as the market can bear. However, there can be no influence of free market principles in a market that has been entirely created by the state. If this were a free market solution, there would be a naturally occuring market for carbon vouchers, and there is not. It is a complete fabrication, and the lie should be obvious from there, but for too many it is not, so this further analysis should help.
Why do we “need” a cap-and-trade system? This is an attempt to address what economists call externalities. This comes from a portion of the cost of production not being reflected in the market price of a product. For example, as the carbon issue goes, manufacturing of commercial goods can place millions of tons of carbon dioxide into the atmosphere each year. This is purported to result in a trend of warming around the globe, which negatively impacts poor and indigenous peoples more than “developed” countries. In this example, the cost of your iPhone does not reflect the total cost of production. The poor, indigenous family does not benefit from your iPhone, but the change in global weather patterns costs them economically in the form of lower crop production. You have, in essence, externalized the cost of your iPhone to poor, indigenous families.
Cap-and-trade solutions attempt to make market price of your iPhone reflect the full production cost. We tax polluters, making them buy vouchers to compensate for their carbon output. This increases the cost of production, and you now bear the full burden of the cost of your iPhone. It seems like such a simple solution, but it is so fundamentally flawed. First of all, what of the poor, indigenous family who is negatively affected by your pollution? Are they not still negatively impacted? The manufacturer paid for the voucher and put the carbon dioxide into the air. The net carbon output has not been reduced. Well, you paid for that carbon, but who did you pay it too. Did you pay it to the poor, indigenous family? They still pay the economic cost, and have not received any economic benefit. You have paid the government, and what did they give you in return? The problem that cap-and-trade was supposed to address is completely ignored. In fact, it gets worse. As American companies are increasingly regulated, they continue to export production facilities to regions on the globe where manufacturing costs are lower. That places the polluting smokestacks right in the back yard of the poor, indigenous family that our policy is supposed to be helping. Cap-and-trade is simply a tool for Americans to export pollution to third-world countries while lining the pockets of politicians and their corrupt business partners, all under the perverted title of capitalism and the free market.