Government Markets are Unreliable
A bill that just sailed through the Republican-controlled New York State Senate on a 59-0 vote should give pause to those companies that support emission trading as a means to comply with Kyoto-style CO2 regulations. The bill would prohibit New York utility companies from keeping the money they make from selling excess SO2 credits, acquired under a provision of the federal Clean Air Act of 1990, to utilities in the Midwestern and Southern United States.
Proponents of the bill claim that utilities in the Midwest and South can buy credits rather than cleaning up their emissions, which then drift into New York increasing the amount of acid rain deposition. “It makes no sense for New York to clean up its own smokestacks and then hand the right to pollute to it neighbors,” said John F. Sheehan, a spokesman for the Adirondack Council, an environmental pressure group.
The U.S. Environmental Protection Agency says it supports the bill. “We arein favor of providing maximum flexibility to states like New York in our common effort to protect public health and the environment,” said Kim Rubey, a spokeswoman for the agency (New York Times, May 2, 2000).
This action by the New York Legislature raises a larger question of what this means for an international CO2 emission trading system. The European Union is adamantly opposed to the use of emission trading as a major component of a countrys compliance strategy. They want to force countries (read the U.S.) to make at least 50 percent of their cuts domestically.
It is quite likely that the EU would do something similar to the New York legislation. In the U.S. the New York bill, if signed into law, will most likely be challenged in court and may be ruled unconstitutional under the Commerce Clause. In the international arena it would be much more difficult to do anything about it. Besides the EU has already showed that it is willing to accept heavy sanctions, as it currently is under WTO rulings, rather than back down. In this case U.S. companies who were counting on the availability of emission credits may be out of luck.
Total Economic Collapse by 2065?
A new paper in the journal Environmental Finance by Aubrey Meyer and Tony Cooper, credentials unknown, of the Global Commons Institute in London makes the astonishing suggestion that global damages caused by global warming, at present rates, could exceed global GDP by 2065.
Citing a potentially catastrophic, if unlikely, outcome of global warming, the authors espouse the precautionary principle, justifying this choice with their own estimates of economic damages resulting from warming: “If the GDP continues to grow at 3% a year for the next hundred years while the damages continue to grow at 10%, global damages exceed global GDP in 2065! The imperative of avoiding this trend is self-evident.” Indeed, it is, but for the nagging suspicion that Meyer and Coopers numbers were conjured and coaxed out of the ether.
The global GDP may be growing at a rate of 3% – that seems reasonable enough. A 10% per annum growth in damages, though, appears unlikely. Moreover, this growth is a continuing trend, something that, unbeknownst to us all, has been eating away at our economic well-being for years, perhaps decades.
What would happen after 2065 when spiraling damages usurp the last of our meager GDP? Would functionally non-depreciated infrastructure collapse into itself, sucked into a black hole of fuzzy logic? To whom would we owe our great debt, this chasm between earnings and destruction? One envisions alien overlords demanding unending tribute as part of some bizarre rent-seeking scheme.