This Is Why Cap-and-Trade Is Stupid

Despite the fact that Los Angeles voters agreed to spend $120 billion on light rail and related transportation projects last November, the region’s transit agency, Metro, says it has a $280 million shortfall in extending its Gold light-rail line 12.4 miles to Montclair. Cap-and-trade to the rescue! Members of the state legislature representing the area have proposed to use cap-and-trade funds to fill the gap.

The cap-and-trade or emissions trading system allows people to spend money buying the right to emit greenhouse gases, and the state uses that money to do things that reduce greenhouse gas emissions. The result is a more efficient allocation of resources than if the state were to simply order everyone to reduce emissions by an arbitrary amount.

So spending cap-and-trade revenues on light rail would make sense if light rail reduces greenhouse gas emissions. But does it? According to page 4.9-33 of the supplemental environmental impact report for the project, the line would actually increase emissions. But that’s okay, says the report, because “the project would contribute less than 0.00001% to the GHG burden for the planet.”

The Antiplanner is happy that it is “only” 0.00001%, though I am not sure comparing this project to the entire planet’s emissions is the appropriate scale. But the point is that the project will increase emissions.

Elsewhere (p. 6-5), the environmental impact report claims, without any documentation, that the cars the light rail will take off the road will offset the increased emissions. But even if it did reduce emissions slightly, at a total cost of $1.4 billion, the cost would probably be in the thousands of dollars per ton of reduced emissions. Yet the people buying cap-and-trade credits are only paying a few dollars per ton. This is far from efficient and completely subverts the point of cap-and-trade.

In other words, local politicians want to use cap-and-trade dollars to support a politically favored project, not one that actually reduces emissions.

Historically, cap-and-trade worked for sulfur dioxide, nitrogen oxides, and a few other toxic air pollutants. But those programs weren’t politicized the way greenhouse gases have been. Rather than use cap-and-trade as a way to reduce emissions, California politicians have been using it as a slush fund to pay for their pork-barrel programs like high-speed rail and light rail. This renders cap-and-trade as wasteful and ineffective as the rail projects it is funding.


4 thoughts on “This Is Why Cap-and-Trade Is Stupid

  1. JOHN1000

    My bet is that 0.00001% of all worldwide emissions is quite a bit more than emitted by most businesses and individuals who are subject to governmental threats and sanctions.

    Using that type of math you can justify almost anything. Even the worst polluters in China could say that a particular dirty-coal plant only produces 0.00001% of emissions a day – or some other such nonsensical formula.

    Remember CO2 is only a .00000400/1 fractional portion of the atmosphere. But everyday the false claim is made that this trace gas is destroying the Earth.

    So the cap and trade group has plenty of experience in playing fast and loose with numbers.

  2. CardGame

    The logic in this post appears to me to be sound when making the claim that the cap-and-trade revenues are being allocated poorly when applied towards the Gold light-rail line. But where does the post demonstrate that cap-and-trade in and of itself is poor policy, as the title implied it would do?

    The post describes one justification for cap-and-trade as the claim that the system will reduce carbon emissions in a more efficient way than a single limit on the total amount of pollution allowed would do. I don’t see where that claim is critiqued. Unless the claim is incorrect, it looks to me like a valid reason to support cap-and-trade.

    The post also describes a feature of cap-and-trade as using the collected taxes to reduce carbon emissions elsewhere, or in other words, cap-and-trade is not a revenue neutral program. If that is a correct description of cap-and-trade, then that prompts the question of what government programs can actually reduce carbon emissions. A possible answer is that no government program can substantially reduce carbon emissions. If that answer were to prove true, then I would question the notion that cap-and-trade can’t be revenue neutral.

    So why would it be poor policy to introduce cap-and-trade that avoids funding a program that doesn’t help the environment. The title of the post is the only part that calls cap-and-trade, itself, inherently poor policy, but the title is important.

  3. the highwayman

    JOHN1000; So the cap and trade group has plenty of experience in playing fast and loose with numbers.

    THWM; Numbers don’t always matter :$

    “Highways are there regardless of economic conditions”

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