Love dat Cap and Trade!

Some call it an incentive, other a call it a tax. In Europe it is called the "Emission Trading System." Canadian Liberal leader Stephane Dion named it the "Green Shift." President Obama calls it "Cap and Trade." Which ever name you prefer, the idea is essentially the same. It is legislation directed at business and industry targeting a specific pollutant, we all know as Carbon Dioxide.

Lets assume that manmade global warming is an unquestionable truth and it is directly related to the amount of CO2 we as people release into the atmosphere. How does "Cap and Trade" help us combat the catastrophic effects that await us? To be blunt, it doesn't. To be even more blunt, it isn't designed to. The idea behind "Cap and Trade," as presented by it's supporters, is to slow the amount of carbon emission so there is time to incorporate future technologies that won't depend on CO2 as a byproduct.

That sounds noble enough, so how does "Cap and Trade" work? To put is simply it works just as the name implies. Companies are allotted a certain amount of CO2 they are allowed to produce, this is done through a device called "Carbon Credits." If a company exceeds their allotment of credits, they are allowed to purchase credits from companies that were able to remain below their limit. That in itself is a great incentive for companies stay below the cap, spare the environment and even make extra money selling unused credits.

What happens if companies exceed their limit and can not buy credits? That is simple, they are punished. Those who refer to "Cap and Trade" as a tax are incorrect, it is a fine. Companies are expected to lower production to meet the limits assigned, if they do not, they will pay fines. Since corporations are designed to grow and expand, it is doubtful that they would limit their own production. So they will just pay the fine. That's ok, big business makes too much money anyway. The only thing is that big business will just incorporate the costs into whatever good or service they provide and pass it on the consumer.

"Cap and Trade" will only effect Big Oil and Big Coal. Unfortunately that is not true. Everything from the vegetables you eat to the parks you walk in have a carbon component. Paper comes from the output of large pulp mills, even the wind powered turbine need a large blast furnace to made. The cost of everything you purchase or use will increase significantly under this policy.

Now what about the revenues that "Cap and Trade" produce for government. That money will go to either paying for excisting entitlements that are over budget or to the creation of new programs. If industry innovates so they can increase production and stay below the limit, then government will simply lower the limit to ensure for adequate revenue. It would be actually be more effective for the government to raise personal taxes to slow the output of CO2. Reduce the demand, you reduce the supply, strange concept.