Monday, December 14, 2009

Why Cap and Trade is Counterproductive

No matter how much we talk about how cap and trade legislation would raise cost of electricity, there are still those who believe it is necessary in order to reduce emissions of green house gases.  The problem is that it will NOT reduce that for very clear, economic and logical reasons.

In order to reduce carbon emissions a company will need to invest in research and development in order to find a better, cleaner way of doing what they already do.  If you really want climate change legislation, the companies should be encouraged to do just that.  But is this what cap and trade will do?  Of course not.

The companies that emit the most green house gases will be required to either pay heavy fines or buy credits from companies who emit low emissions.  Either way, this not only increases their opperating costs; costs which will have to be passed on to the customer in order to stay in business, but it also removes any available funds from research and development.  In other words, we actually prevent them from creating the very innovation we say we need them to make.

If we need our companies to innovate and find cleaner ways of doing things, instead of punishing them for not already having it, why wouldn't we give then incentives to get it done?  Give tax breaks for any funds invested in clean technology and reward the reductions in emissions instead of levying heavy fines which would prevent the innovation.  Why don't we do that? Oh, wait, I know, it's because that would prevent the government from playing favorites within the private sector.  The current cap and trade is nothing but a way for the pet industries of the government to rape the other industries.  I'm very confident this is will happen because this legislation has already been tried in Europe and actually caused emissions to go up.

Instead of repeated the failed policies of Europe, why don't we try something that might actually work.  Incentivize verses punishment.  A novel concept I know, but it just might work.

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