Earth Equity News

Will Carbon Cap-and-Trade be the Next Ponzi Scheme? By Charles Komanoff, Grist, December 28, 2008. "Even as the tsunami of Bernard Madoff's busted Ponzi scheme was submerging hapless rentiers around the world, another esoteric financial enterprise quietly took a step forward [in December]... The new venture is a national carbon cap-and-trade system, and for its Phase I the traders have crafted a ten-state Northeast compact dubbed the Regional Greenhouse Gas Initiative. 'RGGI,' which applies to CO2 emissions from electricity production, has been... long in the making... [On December 17 RGGI held its second auction for carbon credits generating '$106.5 million for investment in energy efficiency, clean and renewable energy technologies.'] Funding energy efficiency and renewable energy is all to the good, of course, and we should tip our hats to the environmental advocates who demanded, and won, that the permits are auctioned rather than given away to the fossil-fuel generators. But there are several back stories that cast RGGI in a potentially Madoff-like light: One is that the program allocations are being made through an insider-driven process over which major green players like the Natural Resources Defense Council and the Environmental Defense Fund wield considerable power. This may be why NRDC and EDF remain wedded to an arcane financial apparatus like cap-and-trade, and highly critical of the quicker, simpler and more transparent carbon-pricing alternative, revenue-neutral carbon taxing. The green groups get to run the action. And while the action may be noble, it could have this profoundly damaging side-effect: as the revenue pie grows -- which it must, exponentially, if the goal is to cause ever-deeper cuts in emissions -- the proceeds allocated to investments, green or otherwise, will come right out of the pocket of families whom the rising energy prices will push further into the red."