The carbon market debate

After attending the debate last week on carbon markets, I thought I would summarize the perspectives from the two sides, as best as I understand them. I know it is more complex than this so hopefully, others can pipe in especially on the economic aspects. The two sides also have very different views on whether there should be government regulations (e.g. allowing the EPA to set caps on GHG levels and using fines for polluters) or market-based solutions.

Proponents’ views:
1. The acid rain issue led to a successful emissions trading model (at least in the U.S.) according to Dirk Forrester. The model maintained economic efficiency while leading to dramatic decreases in NOx and SO2 levels.
2. People are not in favor of a carbon tax – based on past experiences such as the BTU tax. The effectiveness of this legislation in the U.S. was whittled down due to the bill being loaded with exemptions.
3. There must be more supportive arguments – so please someone chip in.

Opponents’ views:
1. The current model for cap and trade in the proposed U.S. legislation is based on old data and models and thus, won’t sufficiently address the problem.
2. There is a slowness in the market response that will not allow this model to work in the timeframe that scientists are calling for.
3. Carbon markets don’t move resources to the market to spur innovative or incentivize new solutions. Rather, money flows to the polluters.
4. Based on the carbon trading in Europe, the price is too low for corporate investment into new technology.
5. A “mixed portfolio” of solutions is required to minimize the risk of additional market crises.
6. Carbon markets don’t address the climate justice issues as it is a solution proposed by those who have caused the problems and not those who are feeling the consequences of climate change and don’t address the issue of “climate debt” – a new phrase that we have heard here a lot. Essentially, how do the industrialized nations (who have added the greenhouse gases to the atmosphere for 200+ years) pay for the “space” they have used and polluted?