How to Blow Less Smoke
The founder of the world's first carbon-offsets exchange would like to clear the air.
Barack Obama and John McCain agree on one thing: the need to cut carbon emissions. With both candidates backing that idea, smoke-spewing factories and power plants can expect big changes soon. Some have prepared by joining the Chicago Climate Exchange, a voluntary market that functions like the NASDAQ but trades emission rights instead of Google stock. Richard Sandor, an economist who's spent decades at the intersection of environmentalism and finance, founded the CCX—the world's first, and America's only, carbon market—in 2003. NEWSWEEK's Fareed Zakaria spoke with him about the exchange and the world's up-and-coming carbon emitters, China and India. Excerpts:
How does the climate exchange work?
The CCX is what is called a cap-and-trade system: there is a cap on the total amount of emissions. In our case, companies have to reduce emissions in the aggregate by 6 percent between 2000 and 2010. If any particular company reduces emissions more than that, they are free to sell those extra credits on the market. Companies that can't make the necessary reductions can buy somebody else's excess.
Why not just mandate that everyone individually cut emissions by 6 percent?
Let's say you're particularly good at reducing emissions—you can change technologies or switch fuels easily. And let's say I can't—I don't have the acreage around my plant [to make renovations], or it will take three years to get permits. I can buy your reductions until I'm capable of doing it. You get the same systemwide reduction, but it's done by those who can do it most cost-effectively and quickest.
Who's involved with the CCX?
We have 17 percent of the Dow Jones industrial average, including IBM, DuPont, United Technologies, Intel. We have 11 percent of the Fortune 100, including Ford Motor Co., Honeywell and International Paper. We have about 25 percent of the top power companies in America, including AEP, the biggest burner of coal in the Western hemisphere. We also have eight cities, from Chicago to Portland, and eight universities from Tufts in the east to UC San Diego in the West.
Why are they agreeing to cut emissions when there's no law requiring it?
Some do it because they see an easy way to make reductions [beyond the minimum 6 percent]. They can then sell the credit and make extra money. There are also many companies who just want to be involved in the process—if you're not at the table, you're on the menu. If there's going to be legislation, they want to get an early start.
They're betting America will institute a mandatory cap-and-trade system.
Exactly. Some companies, like Ford, joined because they knew they were going to be involved in other cap-and-trade systems around the world—they have manufacturing plants in Manchester and Marseilles and Japan, and they were operating in countries that were subject to the Kyoto Protocol [whose signatories must start cap-and-trade systems by 2008].
What has happened to the price of carbon in the United States?
The price of carbon started out at a dollar a ton. It hung around there for a while, but the world changed on Super Tuesday. When it became clear that all three candidates—Clinton, Obama and McCain—all favored a national cap-and-trade system, the price of carbon went from $1.90 to $7.
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Posted By: Jim Johnson @ 10/16/2008 7:56:29 PM
Comment: Obama's view of the future of America - Socialism which is the next step to Communism!!
Under socialism a ruling class of intellectuals, bureaucrats and social planners decide what people want or what is good for society and then use the coercive power of the State to regulate, tax, and redistribute the wealth of those who work for a living. In other words, socialism is a form of legalized theft.
The morality of socialism can be summed-up in two words: envy and self-sacrifice. Envy is the desire to not only possess another's wealth but also the desire to see another's wealth lowered to the level of one's own. Socialism's teaching on self-sacrifice was nicely summarized by two of its greatest defenders, Hermann Goering and Bennito Mussolini. The highest principle of Nazism (National Socialism), said Goering, is: "Common good comes before private good." Fascism, said
Mussolini, is "a life in which the individual, through the sacrifice of his own private interests??realizes that completely spiritual existence in which his value as a man lies."
Socialism is the social system which institutionalizes envy and self-sacrifice: It is the social system which uses compulsion and the organized violence of the State to expropriate wealth from the producer class for its redistribution to the parasitical class.
Despite the intellectuals' psychotic hatred of capitalism, it is the only moral and just social system.
Capitalism is the only moral system because it requires human beings to deal with one another as traders--that is, as free moral agents trading and selling goods and services on the basis of mutual consent.
Capitalism is the only just system because the sole criterion that determines the value of thing exchanged is the free, voluntary, universal judgement of the consumer. Coercion and fraud are anathema to the free-market system.
It is both moral and just because the degree to which man rises or falls in society is determined by the degree to which he uses his mind. Capitalism is the only social system that rewards merit, ability and achievement, regardless of one's birth or station in life.
Yes, there are winners and losers in capitalism. The winners are those who are honest, industrious, thoughtful, prudent, frugal, responsible, disciplined, and efficient. The losers are those who are shiftless, lazy, imprudent, extravagant, negligent, impractical, and inefficient. [What about the role of luckbeing in the right place at the right time or the wrong place at the wrong time? R. R. Pope}
Capitalism is the only social system that rewards virtue and punishes vice. This applies to both the business executive and the carpenter, the lawyer and the factory worker.
Posted By: auntEm @ 10/08/2008 12:16:19 AM
Comment: Why, in all the discussion about alternative energy, is there no mention of geothermal. I know that Nevada was developing quite a large project in one of the towns along I-80 some years ago. We no longer live in Nevada and I have not heard anything more about it. I know there are many, many areas in the United States with large underground sources of hot water; and that some other countries do generate electricity from geo thermal sources.
Do you know if either of the Presidential candidates have included it in their plans to develop alternative sources of energy?
Emmy Hockett, Ajo, Arizona
Posted By: Wayne Wathen @ 09/18/2008 2:03:19 PM
Comment: One question that I have related to this interesting article is global warming in general. As far as I am aware, George Bush continues to state that we can't aggressively deal with global warming because it may hurt the economy. In the meantime, millions and perhaps billions of dollars are being lost because of hurricanes, fires, drought, and floods as a result at least in part due to global warming. Yet, to my knowledge, know one has writing any articles stating that George Bush is wrong and the economy is being harmed because we are not tackling global warming with all of our resources available to us.
Wayne Wathen