The United States is the major opponent to a global carbon “emissions” trading scheme. Most people blame this on ignorance in the Bush administration and expect President-elect Obama to endorse the “cap-and-trade” scheme of the 1998 Kyoto Accords. This would be a mistake. Cap-and-trade schemes push polluters and their jobs to poorer nations, while enriching bankers with trading commissions and rewarding established polluters with valuable credits.The reason carbon trading is popular is because existing polluters are exempted by providing them with free emissions credits. In many cases, they are provided with extra credits to allow future growth. Amazingly, they can sell these free credits for a hefty profit. Meanwhile, carbon trading provides the financial community with a new line of business where they earn commissions, while the cost of carbon trading falls upon consumers as prices rise.
This is why it was easy to convince most major industrialized nations to agree to a global cap-and-trade scheme. Australia was opposed, yet its new government has promised to sign on. President-elect Obama prefers a 100% auction scheme so that existing polluters must buy credits, yet this idea of fairness is probably politically unacceptable in Congress. Meanwhile, polluters whose nation did not sign at Kyoto have a competitive advantage. Carbon caps are exploited to reduce labor costs. Germany is one of the only large nations that reduced their greenhouse emissions to meet Kyoto targets. However, most of the reduction was possible because polluting factories moved to poorer nations. Nations that agreed to carbon trading now find domestic factories and their jobs moving aboard, where they can pollute for free and use cheap, coal-powered electricity.
For example, European cement makers may move to countries like Morocco. Dutch manufacturers with the world’s cleanest and most efficient industrial equipment cannot compete with those in Asia that use older and dirtier techniques because emissions restrictions caused their electricity rates to soar. This is another reason why carbon trading is popular with corporations. It gives them an excuse to move manufacturing abroad where labor and electricity is much cheaper.
Those aware of the carbon racket advocate a carbon tax so that money flows to governments, rather than indirectly to established polluters and “carbon traders.” It results in a faster reduction in greenhouse emissions because today’s biggest polluters would pay the most, thus encouraging them to adopt new technology. A carbon tax favors new companies that introduce environmentally friendly equipment. For example, the newer Boeing 777 passenger jet is around 50% more efficient that the older 767 because its airframe incorporates more lightweight composite materials and the 777 uses two bigger engines, rather than four in the 767. With carbon trading, a new company that plans to use 777s must pay for carbon credits to introduce a more environmentally friendly aircraft into the market, while users of the 767 continue to fly with gifted credits. Likewise, a builder of a clean coal plant must buy carbon credits to compete with an old dirty coal plant that paid nothing.
This is why major corporations support carbon trading. It requires them to pay nothing and rewards them with billions of dollars in carbon credits that future competitors must buy from them in the market. In contrast, a carbon tax treats all polluters equally, thus favoring the cleanest. In addition, carbon trading provides no incentive for governments to closely monitor emissions, which results in cheating. In contrast, a carbon tax ensures keen government interest in monitoring emissions to pursue tax cheaters. A final advantage of a carbon tax is that it can be levied on imports from nations that are heavy polluters,
Ban or Tax Coal Exports
Carbon trading is a racket. A carbon tax is better, but difficult to administer because pollution is a worldwide problem. A practical solution in some nations is to gradually ban or heavily tax coal exports, especially to nations that use old coal powered plants without scrubbers. Australia is the world’s top coal exporter generating $17.5 billion in 2007. The USA produces its own coal domestically, and exports around 6% of total production. Demand has increased rapidly and worldwide prices have recently tripled. Coal companies have not invested enough in capacity expansion, so prices will rise further.
The simple solution for Australia and the USA to restrain energy prices and reduce worldwide greenhouse emissions is to heavily tax or gradually ban the export of coal. Why should Australians and Americans pay outrageous prices for coal generated electricity in order to supply China with all the coal it desires? Even dictators in oil exporting nations do not expect their citizens to pay the market price for oil, so why should Americans and Australians pay the world market price for coal?
The U.S. Department of Energy reports that hundreds of new coal plants will be built in the USA over the coming decade because it is the cheapest option to meet growing demand. During his campaign, President-elect Obama expressed conflicting views on coal, preferring “clean” coal if practical. The price advantage has weakened as prices soared due to exports. Those concerned about pollution and climate change are blocking the construction of some coal plants in the USA. Why should Americans pay high prices for imported energy, while cheap coal is exported and burned abroad? Moreover, much of the exported coal is burned in old power plants that produce far more emissions than new, modern power plants in the USA.
While some call the USA the “Saudi Arabia of coal,” they overlook the challenges of increasing domestic coal production. Data showing the USA has more than a hundred years of coal reserves always use “at current rates of consumption.” Future rates of coal consumption will be much higher due to population growth and depleting reserves of natural gas and oil. In addition, coal-to-liquid refineries are under construction to produce expensive synthetic petroleum that will deplete coal reserves as well. Finally, new “clean coal” technologies require substantial energy to operate, so more coal must be burned to clean it.
The USA was the world’s leading exporter of oil a few decades ago. It is now the world’s leading importer. American and Australian coal companies are booking record profits, although an export ban should cap price increases. The only opposition to this sensible idea comes from free trade advocats, who view such action as a sin. Yes, banning the export of coal would result lower electricity prices, preserve this non-renewable resource for future generations, and reduce worldwide pollution, but it is a free trade sin.
The Cap and Trade Illusion
Cap-and-trade emissions schemes are an ineffective method of reducing pollution. Taxes are better since they produce revenue that can be directed toward energy research. However, pollution is a worldwide problem that must be addressed with international agreements and import/export taxes efforts. These complex issues are evaded when victory is declared by implementing carbon trading schemes that push polluters and their jobs to poorer nations, while enriching bankers with trading commissions and established polluters with valuable credits.
 “U.S. looks to green Europe – Mistakes there could shape American plans to curb carbon gases”, MSNBC, April 10, 2007.
 “Coal mine expansions in U.S. can’t match global shortfall”, Mineweb, June 17, 2008.