Designing the Carbon Cartel

John A. Charles, Jr.QuickPoint!

Gov. Ted Kulongoski announced on Monday that he has joined 4 other governors in signing the Western Regional Climate Action Initiative. The stated goal of the Initiative is to “collaborate in identifying, evaluating and implementing ways to reduce greenhouse gas emissions”.

As is typically the case with such pronouncements, none of the governors has an actual plan for making it work. The centerpiece is supposed to be a multi-state cap on carbon dioxide emissions. Once the cap is established, large emitters would either reduce emissions or buy CO2 credits from others, thereby lowering total emissions below the limit.

But in order to trade CO2, someone has to first transform it into an asset. At a minimum, that will mean creating a new set of property rights out of thin air. Considering that CO2 is constantly being emitted by millions of Oregonians, while also being taken up (or sequestered) by others, this is going to be a daunting task.

The governors can’t tell us what the carbon dioxide limit will be or who will enforce it. The cap will create an artificial shortage of energy and thus raise prices to consumers, but no one knows how much it will cost or what the environmental benefits will be.

Europe has already attempted to implement a carbon trading scheme, and it has been plagued with problems. Until the governors develop solutions to these problems, the Western Initiative cannot be taken very seriously.

John A. Charles, Jr. is president and CEO at Cascade Policy Institute, a Portland, Oregon-based think tank.

© 2007, Cascade Policy Institute. All rights reserved. Permission to reprint in whole or in part is hereby granted, provided the author and Cascade Policy Institute are cited. Contact Cascade at (503) 242-0900 to arrange print or broadcast interviews on this topic. For more topics visit the QuickPoint! archive.

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