“If carbon cap-and-trade policies are so bad for the economy, why do so many major corporations, like the members of United States Climate Action Partnership advocate cap-and-trade?”
I can’t count how many times I’ve heard that line of chatter—and from people who usually assume anything corporations are for must be bad!
There are many reasons some corporations support cap-and-trade, or at least say nice things about it in public. Some companies seek the PR value from looking green.
Others believe they must be “at the table” or they’ll be “on the menu.” That is, they want to be in a position to influence the rules of a future cap-and-trade system, but negotiating is difficult if you announce in advance your opposition to whatever is eventually negotiated.
Others, like many Wall Street firms, see carbon trading as an opportunity to collect commissions and fees for managing portfolios and brokering trades in a new commodity market. To a trader, carbon credits and pork belly futures look and taste exactly the same!
But in the case of energy companies, many who support cap-and-trade do so in the expectation that they’ll get a boatload of carbon permits from the government—for free!
Permits represent an artificial, government-created scarcity in the right to produce energy. The right to produce energy is very valuable, especially where government restricts it. The tighter the cap, the more valuable each permit traded under the cap.
Nobody wants to have to buy carbon permits, but lots of companies hope to sell permits, especially if they can get them at no charge.
CEI has said for some time that there is nothing like the prospect of having to buy permits in competitive auctions to sour energy companies on cap-and-trade and expose the money-for-nothing greed that impels them to join coalitions like U.S. CAP.
Well, we now have some real-world evidence. The European Commission has put out a proposal that would require all European energy companies to purchase their Kyoto carbon permits through auctions beginning in 2013.
This has not only provoked audible corporate whining, it has also put a big chill on the construction of power plants and transmission lines, as reported here and here. According to one report, “investments had slowed in recent years and Europe was now twice as vulnerable to external [energy] shocks as it was in the 1960s.” Really, you mean cap-and-trade reduces energy production and makes society more vulnerable to supply disruptions? Shocking, just shocking!
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