WSJ: Cap and No More Trade

[OKIsItJustMe]

http://online.wsj.com/article/SB10001424052748704895204575321160587141150.html

* JULY 12, 2010

Cap and No More Trade

Market-based environmental programs can work well. But as the acid-rain market shows, they need clear rules set by the government.

By MARK PETERS

After more than a decade of slashing air pollution from power plants, the original U.S. cap-and-trade market has ground to a halt. The final blow likely was delivered by new federal pollution rules announced last week.

The acid-rain market has been in a state of disarray for the past two years as utilities, states and investors waited for the Environmental Protection Agency to issue new rules. Now those rules are out, and they set strict new limits on emissions. But they also reduce utilities' ability to trade allowances to meet those tighter standards. As a result, the value of the allowances already on the market are expected to fall to zero, causing a complete collapse of trading.

Hopes are few that the market will recover. And that holds a warning for policy makers hoping to establish a similar market-based approach to curb emissions of carbon, which scientists have linked to global warming. Though they've worked well for years, market-based approaches to reducing air pollution are extremely vulnerable to government actions. And just like in markets in general, investors—and utilities in this case—hate uncertainty.

The cap-and-trade approach was first used to curb pollutants causing acid rain. European carbon markets followed, modeled in part on the acid-rain market's early success. But a federal court in 2008 rejected a complex 2005 plan by the EPA to expand U.S. environmental markets. In response, prices for the pollution allowances that drive emission reductions plunged. Utilities held off on projects to clean up their plants.

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[Nihil]

1. "Cap and trade" has always been a bodge job ...

.. designed to allow politicians to look like they were doing something
without impacting their sponsors too much. If the "regulators" hadn't
been so spineless, the maximum pollutant levels would have been set in law
rather than just hand-waved with a "trade" get-out clause to keep BAU.

[OKIsItJustMe]

2. "Cap and trade" helped save New York's lakes

http://www.edf.org/page.cfm?tagID=1085

[Nihil]

3. "Environmental laws" would also have done it ...

... without playing the "guess how much pollution we're getting away with" game.

(But it wouldn't have been as "rewarding" to the politicians as they would have
to have drawn a line rather than letting the polluters sorry, the market draw it
as & when they felt like it.)