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Opportunities in the oil spill, Part 2: Cap and trade

June 26, 2010 - Mike Maneval

In my previous post, I discussed treating crises as "opportunities" and how the practice, derided by many as cynical, is being applied to the leaking BP oil well in the Gulf of Mexico. While I began with a focus on how some outside the White House seem to view the disaster as a chance to chisel away at Americans' paychecks, I also alluded to the Obama administration engaging in the tactic itself.

It does so with the response to the Gulf spill, as well. Part and parcel of the White House's response is a renewed push for an emissions-reduction proposal known as "cap and trade," in which carbon-emitting industries can buy and sell the quantity of carbon they release as a byproduct of their core activities.

The proposal, just as it was before an explosion on an oil rig released a steady flow of oil into the ocean, is deeply flawed. Daniel Leonhardt, writing in defense of the proposal for the New York Times earlier this month,cagily relates, "the great economic strength of market systems like cap and trade also happens to be their political weakness." I would say his admission that the proposal costs a "little bit of money" is an understatement. Of the higher cost, Leonhardt admits that "voters don’t like it. Accepting higher costs is especially hard when the economy is weak."

But the added fiscal burden is not the only reason for skepticism of cap and trade's merits. As my last blog noted, many of the offers of foreign assistance in the Gulf have not been offers of assistance at all, but efforts to capitalize on our demand for certain, critical, resources and labor. Likewise, other developing nations, most notably India and China, have been relunctant to cooperate on a carbon-reduction strategy, a move of self-interest that both weakens any effort to reduce emissions and disadvantages American businesses competing against their lower standards.



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