The USA has been gripped by three simple words that most Americans can’t explain – ‘Cap And Trade’. President Obama is trying to pass legislation that will impose caps on the quantity of carbon emissions individual companies are allowed to release, with companies releasing less than their allotted quota being allowed to sell the surplus on. In providing financial incentive for low carbon emissions, the policy should induce some major companies to become more environmentally friendly – by switching from fossil fuels to solar power, for example – while allowing for the fact that some companies inevitably cannot, or will not, limit their pollution. It’s like GCSE Maths for Big Business: Rex has an allowance of eight barrels of oil, but he only needs to use three. David has an allowance of eight barrels of oil, but he needs to use ten. How many oil-barrel quotas should David buy from Rex?
Since 2003 Europe has used a similar model,the European Union Emission Trading Scheme, yet for a majority of Americans the entire concept remains something of a mystery. Rasmussen Reports, a public opinion pollster, asked a thousand Americans what they thought ‘Cap and Trade’ was. 30% thought it was related to Wall Street regulation, 17% suggested it was connected with healthcare reform and 30% couldn’t even hazard a guess. Only 24% thought it had something to do with environmental issues.
It is a worrying indication of ignorance, especially for a country with one of the highest CO2 emissions per capita in the world. It is also very embarrassing considering the amount of money spent on the lobbying, advertising and spin-doctoring swirling around the words ‘Cap and Trade’; “I’ve never seen this much media spending on a bill that is only in the subcommittee” says John Larsen of the World Resource Institute. Unfortunately, the overwhelming message being conveyed is sponsored by lobbyists arguing that the expensive transition to greener practices would cost the consumer dearly: “Turn on a radio in the blighted town in America’s rust belt, and a new advertisement paid for by a lobbying group claims that ordinary families could be worse off by thousands of dollars if Congress passes the draft global warming law” reports the Guardian. “Emissions Cap-and-Trade Aids the Corrupt, Hurts the Little Guy” argues US News. Clearly the crucial weapon in what Mr Larsen calls the “war of perception” is the wallet; the consumer does not want to pay for changes that will not directly improve the product they receive. As Warren Buffet, the multi-billionaire businessman, told CNBC: “Anything you put in that effectively taxes carbon emissions, somebody is going to bear the brunt of it. In the case of a regulated utility company, the utility customers are going to pay for it”.
So they may not understand it, but Mr and Mrs Average Joe are the ones who’ll be paying for ‘Cap and Trade’. It’s difficult to predict exactly how much will be taken from US pay cheques: $680 to $1,500 per year according to The Wall Street Journal; $3,100 per year according to some Republicans. You can hear cursings of Obama reverberating across the internet; “First you give American families a $400 to $1000 tax break, then you make companies like Shell (profits of $26 billion), Chevron ($23 billion) and ExxonMobil ($45 billion) take it!” The consumer inevitably bares the brunt of the millions and millions spent lobbying against the ‘Cap and Trade’ system.
The International Energy Agency has stressed that “the need to address climate change will require a massive switch to high-efficiency, low-carbon, energy technologies”. Scientists at the University of Bristol have proven that human pollution is turning the sea dangerously acidic, and the Kremlin recently predicted the growing struggle for the world’s energy resources could lead to military conflict in the Arctic. A recent report from University CollegeLondon and The Lancet described global warming as “the biggest global health threat of the 21st century”. Yet these facts are not at the forefront of the ‘Cap and Trade’ debate; in what John Larsen calls this “war of perception”, hysteria surrounds the financial cost of action rather than the environmental cost of inaction and there is often still a slight ‘left-wing-hippie’ tag attached to those raising green issues. As Charlie Munger, the CEO billionaire, has said about rising sea and pollution levels, “I don’t think it’s an utter calamity for mankind…you’d have to be a pot-smoking journalism student to think that”.