Guest Columnist: Voluntary CO2 Trading A Bad Idea
By Gary Gallon
Gary Gallon is the publisher of the Gallon Environment Newsletter, published weekly from Montreal, Canada. He helped found the Canadian environmental movement and continues to be one of its leading lights. To receive his free weekly email newsletter send an email to: firstname.lastname@example.org
According to David E. Wojick Ph.D., in his report entitled, "The Trap of Voluntary CO2 Trading," "the idea is that if GHG reductions ever become mandatory, those who cut now will not be penalized. They will have credits to sell. Wojick says that this is a very bad idea.
"Voluntary trading is a prescription for financial speculation of unprecedented proportion."
"The current Voluntary Reporting of Greenhouse Gases program has been operational since 1994 and contains reports from 222 corporations, associations, and individuals. It works just fine. But the George Bush administration is strongly proposing the development of a trading program for voluntary greenhouse gas emission reduction credits.
In fact, the Senate energy bill also provides for voluntary GHG credit trading."
Wojick reports that, "voluntary GHG reductions will be mostly cheap cuts. But mandatory cuts, if ever enacted, will include lots of very expensive cuts. The numbers are big, hundreds of billions of dollars a year for Kyoto, for example, according to the Energy Information Administration. So voluntary trading creates a market in which the value of these cheap credits will increase stupendously if major GHG reductions are ever made mandatory. The potential market is on the order of hundreds of billions of dollars a year, with an equally large potential for financial and political mischief." Wojick states that, "creating a market for a commodity whose ultimate value is not known, but could be very great, is a bad policy, especially when that ultimate value depends on future Congressional action. Any time the possibility of a mandatory program arises the market value of the low-cost voluntary credits will rise as well. Uncertainty will fuel speculation, with potentially disastrous financial consequences for the losers."
He says, "consider the inevitable dynamics. Congressional action is a drawn-out, on-again, off-again, iffy proposition. The resulting market for credits has to be extremely speculative, hence prices very volatile. Prices will rise or fall as mandatory reduction bills advance or stall, or as key players make statements pro and con, etc. Bubbles will swell and burst, with big losers either way. Speculation and extreme price volatility are always damaging, yet many firms will be forced to play."
Wojick asks, "who favours voluntary GHG trading? Greens (first step to mandatory cuts, who cares about hurting industry). Marketers and speculators, who hope to make big bucks (Enron was chief among them). Windfallers who are going to cut anyway (some big coal-burners come to mind). And, finally, benighted "stability seekers" (who don't understand the game). Tradable credits for voluntary GHG reduction is a very bad concept. People have enough problems without being subjected to flaming speculation in the product of combustion."
For more information contact David E. Wojick, Ph.D., President, Climatechangedebate.org, 391 Flickertail Lane, Star Tannery, Virginia 22654, USA., (540) 858-3503, email email@example.com .
Source, The Electricity Daily, July 29, 2002. Visit the website at http://www.electricity-online.com.
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