The debate on how to address global warming is flawed and guarantees that currently presented plans to reduce greenhouse gasses emissions will fail. The premise of the debate is that the world is warming due to man’s use of carbon-based energy and that something needs to be done quickly to avoid catastrophic effects on the environment. We will assume for this posting that man-made global warming is factual, even though the scientific evidence is not conclusive.
The Obama administration’s plan to address man-made global warming is “Cap and Trade”, whereby companies will be limited in their energy consumption. Once their limit is exceeded, they may purchase unused credits from those that have excess, at increasing prices. This is designed to put a cap on total carbon-based energy used and increase its cost through a quasi market-based system.
Why will Cap and Trade fail? Cap and Trade will fail because it will likely lead to an increase in the total world-wide consumption of carbon-based energy. Why will it do that? Because of the most fundamental rule of Econ 101. Read the rest of this entry »