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Wednesday, July 16, 2008

Cap and Trade Carbon Policies Could Increase Emissions, Says Justin Danhof

Cap and trade policies ostensibly designed to reduce greenhouse gas emissions could have the opposite effect, says the National Center for Public Policy Research's Justin Danhof in an op-ed published today by the Christian Science Monitor.

That's because of an established principle of behavioral law and economics explaining that when a stigmatized behavior is turned into a commodity that can be bought and sold, that behavior tends to lose the stigma associated with it.

Writing in the Monitor, Justin describes a social science experiment in which parents were fined if they arrived late to pick up their children from child care. After the fine was imposed, the number of parents arriving late increased, because guilt associated with arriving late had been replaced with the opportunity to buy the right to arrive late, guilt-free. "Parents," says Justin, "were no longer 'arriving late,' but rather, purchasing extra child-care hours."

Justin continues: "A similar situation could occur under a cap-and-trade regime. Under cap-and-trade rules, the government places an artificial cap on the amount of carbon each regulated facility may emit. Facilities producing more carbon than they are allowed are required to purchase additional credits to make up the difference. The opportunity to purchase these credits creates a market where none previously existed. As in the example of the fined parents, the purchase of the right to emit greenhouse gases would likely reduce any stigma associated with doing so. Emission levels, consequently, could rise."

Justin says there are real-world examples of this principle at play in the global warming arena: "Al Gore says the risk of catastrophic global warming is so great that Americans should act immediately to reduce greenhouse-gas emissions. Yet his home uses 20 times more energy than the average American home, according to the Tennessee Center for Policy Research. That's OK, the former vice president assures us, because he purchases offsets to ensure that he lives a carbon-neutral lifestyle... If Mr. Gore could not purchase offsets, would he feel more pressure to reduce his energy use? The likely answer is 'yes.'"

The article goes on to cite works by Santa Fe Institute researcher Samuel Boles and columnist Charles Krauthammer, and to review the results of Europe's cap and trade program before concluding: "The social stigma of carbon emissions grows stronger each day. As this stigma grows, companies are increasing their investments into research and technologies to reduce and store carbon. If Congress removes the stigma associated with these emissions by assigning a price to them, it may not like the results."

The complete article can be read on the Christian Science Monitor website here or via http://tiny.cc/4HhHG. To send Justin Danhof a comment, write him at [email protected].
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Posted by Amy Ridenour at 9:59 AM

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