I first saw the long version of this opinion piece at CounterPunch!(!) of all places as I was looking for a link to "U.S. Carbon Market Design: Regulating Emission Allowances as Financial Instruments" (36 page PDF).
The CounterPunch! version has footnotes!
Here it is reprinted at the Carbon Tax Center:
From the long version:
For aficionados of offbeat road races, there are few events that top the Tour de Donut, a 30-mile bicycle race held every July in tiny Staunton, Illinois. In this belly-busting race, competitors stop twice during the course at break stations where they are offered glazed donuts. For every donut that competitors consume, five minutes are deducted from their scores. Thus, for even mediocre riders who also are really good donut eaters, the ride offers an offset structure that makes them champions. In recent years, with top competitors downing over 20 donuts each, winners have actually posted negative times, finishing their races—on the books at least– before they began.Offsets, when measured not in donuts but in carbon equivalents, have about as much correspondence to real-time facts. Unfortunately, current climate change legislation being drafted in Washington, DC today is anchored in a scheme nearly as absurd as that offered by the glazed treat-loving architects of the Tour de Donut....
...Current realities: bad and worse choices
Nearly three decades of Reaganesque rhetoric extolling the necessity of reaching goals through “markets,” no matter how convoluted or artificial, has clouded the judgment of policymakers and corporate eco-optimists who advise them. We are told that the choice we face is between a cap-and-trade system or no regulation whatsoever. This is not a real choice. What few Beltway insiders publicly acknowledge is that greenhouse gas reduction schemes currently operating in the European Union possess neither the characteristics of real markets nor the capacity to reduce global emissions of greenhouse gases by even close to the 80 percent thought necessary by 2050.
We hold that a cap-and-trade system is not, as apologists have maintained, a flawed but good start to a green economy. Instead, the rise of a cap-and-trade system for the U.S. economy, disastrously, intersects with an implosion of global financial markets. Currently, refugee capital suddenly unable to find profit margins in sub-prime mortgage securities or credit default swaps is eager to securitize the trading of six billion tons of U.S. greenhouse gases in globalized climate markets. In fact, a group of leading analysts advising Congress on cap and trade at the Duke University Nicholas Institute have recently put out an enthusiastic paper making recommendations about how policymakers should set up the derivatives market for climate-backed financial instruments. The same analysts are very clear about just how large a role derivatives will play in a cap-and-trade system, as they state in convoluted but determined Wall Street terms: “A low volume of allowances in the marketplace and/or significant concerns about allowance price volatility in future years may cause the majority of allowance-based instruments to trade as derivatives (including forward contracts) rather than allowances.” (emphasis ours). (3)
Since the late 1980s, successive speculative bubbles that have run through Wall Street and the Chicago Board of Exchange have destroyed trillions of dollars in wages and wealth of ordinary people. Now, brokerage houses interests turning climate securities into bundles of climate-based derivatives will sever the emissions reductions contracts on the market from the material act of reducing carbon in the atmosphere. The results of this final round of financial speculation, however, are unlikely to end in another bailout. Citizens fleeing cities disappearing under rising floodwaters won’t have any cash to cough up this time to keep the traders in corporate jets and fine penthouses on Park Avenue.
It is our contention that if anthropogenic climate change is indeed a threat and rapid carbon emission reductions are non-negotiable, then regulatory regimes must be transparent and independent of special interest pressures. A cap-and-trade system would be neither. Furthermore the construction and oversight of gargantuan trading markets would be left to the Environmental Protection Agency, a secretariat with no history in overseeing markets of this magnitude and complexity. This would likely leave the task to be outsourced to eager executives fresh from Wall Street layoffs. If the abominable regulatory record of the U.S. Federal Reserve and the Securities and Exchange Commission is any indication of the willingness or the ability of government trade authorities to see to public interests above firm interests, the world is imperiled indeed by the implementation of a cap-and-trade system in the U.S. for carbon emissions.
We hold that a cap-and-trade system of the sort seen in most recent climate change legislation in Congress is a mistake for the following reasons:...MORE