Quebec/Ontario Cap-and-Trade: Warnings from James Hansen

“Cap-and-trade is a hidden regressive tax, benefiting the select few who have managed to get themselves written into the … bill…. Think revolving door between the government and Wall Street.  Think revolving door between Congress and lobbyists.”

– James Hansen, “I Just Had a Baby, at Age 68,” (2009).

“Ontario and Quebec to sign cap-and-trade deal Monday ahead of premiers’ summit on climate change,” the headline from the National Post (Canada) read over the weekend. Yesterday, in fact, Ontario Premier Kathleen Wynne signed an agreement with Quebec Premier Philippe Couillard to price (regulate) carbon-dioxide (CO2) emissions in an effort to reduce greenhouse gas emissions. Such joins California, which has an operating cap-and-trade program pursuant to the Western Climate Initiative.

Cap-and-trade has been lambasted by the father of climate alarmism, James Hansen, whose testimony in mid-1988 brought the issue of the enhanced greenhouse effect to a national audience. In the last decade, Hansen has been a leading critic of the Waxman-Markey cap-and-trade bill (House legislation that did not pass the Senate); California’s cap-and-trade program; and, most recently, Australia’s cap-and-trade program, and the Copenhagen Accord.

Presumably, using the same logic, he would also censure the Regional Greenhouse Gas Initiative (RGGI) and the new Ontario/Quebec agreement.

So what does Hansen want? A carbon tax, a fee-and-dividend, with every penny being rebated to citizens. Such is “clean” tax is a figment of the imagination; proponents admit to the need for border adjustments (tariffs) to penalize those countries lagging in implementing the ‘right’ amount of tax; rebates to lower-income citizens to counter the regressive nature of the tax; and other special provisions for alleged effectiveness and fairness.

Still, Hansen’s analysis of cap-and-trade is healthy for today’s carbon pricing debate.

James Hansen on Australia’s Cap-and-Trade (2014)

“The two main points that I made in discussions in Australia re their cap-and-trade were (1) it would be ineffectual in reducing emissions, and (2) it would be recognized as a tax, and thus it would not survive and grow at the rate needed to phase out emissions.

“Did you know that cap-and-trade is by and for big banks? In the U.S. there is a revolving door between Wall Street and Washington. The skilled trading units at JP Morgan Chase and Goldman-Sachs can make enormous amounts from cap-and-trade, every dime coming out of the public’s pockets.

“The fluctuating prices are bad for our purpose. If the public, businesses, and entrepreneurs know that carbon prices will continue to rise, as in fee-and-dividend, they will begin to make the choices that move us rapidly to a clean energy future.

“The half-baked 3000+ pages of the Waxman/Markey cap-and-trade scheme in the U.S. (and scheme is the right word) were not written by our Senators or Representatives slaving into the night. They were written by lobbyists for special interests and stapled into the bill by our elected representatives, who are beholden to the special interests.

“Our representatives, in both parties, seem to feel entitled to the Washington life style, once elected. Did you know that Dick Gephardt, after retiring as House Democratic Leader, received $120,000 per quarter from a single source (Peabody Coal)? I doubt that Peabody wastes its money — they probably get their money’s worth in lobbying. I don’t mean to pick on the Democrats; one party is not noticeably better than the other in this regard.

“We seem to have a situation where members of both parties like their status and don’t really want to stanch the money flow. And the electoral system has been pretty well rigged such that it is very hard for a third party to rise.”

– Hansen, Facing Facebook: Australia’s Cap-and-Tax, July 29, 2014.

James Hansen on California Cap-and-Trade (2012)

“You don’t want [California’s] system with caps, where you have trading, you have derivatives, you have markets that then collapse and don’t actually reduce emissions much. That’s been tried in Europe, and it didn’t do much.”

– Hansen, quoted in David Baker, “James Hansen Blasts Cap-and-Trade,” San Francisco Chronicle, December 5, 2012.

James Hansen on Federal (Waxman-Markey) Cap-and-Trade (2009/2010)

“Cap-and-trade’s complexity provides a breeding ground for special interests…. Why do those special interests deserve it anyhow?”

– James Hansen, “The People vs. Cap-and-Tax,” New York City, January 12, 2010.

“The truth is, the climate course set by Waxman-Markey is a disaster course. It is an exceedingly inefficient way to get a small reduction of emissions. It is less than worthless….”

– James Hansen, “Strategies to Address Global Warming,” July 13, 2009.

“Governments are retreating to feckless ‘cap-and-trade,’ a minor tweak to business-as-usual….

“Why is this cap-and-trade temple of doom worshipped?  The 648-page cap-and-trade monstrosity that is being foisted on the U.S. Congress provides the answer.  Not a single Congressperson has read it.  They don’t need to – they just need to add more paragraphs to support their own special interests.  By the way, the Congress people do not write most of those paragraphs—they are ‘suggested’ by people in alligator shoes.”

– James Hansen, “Worshipping the Temple of Doom,” 2009.

“The Waxman-Markey and Boxer-Kerry cap-and-trade bills in Congress are larded with 2,000 pages of give-aways to special interests, soaking the public who must pay higher energy prices.

“What is the chance that a United States cap-and-trade law could be a precursor for a global agreement? Zero. There is no chance that China will accept a cap. Nor should they. They are still in the early phase of their economic development.

“[Paul] Krugman says that my suggestion that carbon trading will be an open invitation to Wall Street to again pillage the financial system ‘is bizarre.’ What is bizarre, in my opinion, is his implicit presumption that government regulators can outwit Wall Street executives.

“Congress can write a cap-and-trade bill that tries to exclude Wall Street. But to think that Wall Street will not get involved in carbon profits, directly or indirectly, is naïve. This is a free country. Wall Street banks can buy the companies most affected by carbon price.

“Congress is accustomed to working with special interests. There is a revolving door between Congress and lobbyists. Ex-members know the Washington ropes. The lobbyists wrote most of the pages in the 2,000-page bills in Congress.”

– James Hansen, “The People vs. Cap-and-Tax,” paper delivered to the Chairperson of the Carbon Trading Summit, New York City, January 12, 2010.

James Hansen on Copenhagen (2009)

“The fraudulence of the Copenhagen approach – ‘goals’ for emission reductions, ‘offsets’ that render even iron-clad goals almost meaningless, an ineffectual ‘cap-and-trade’ mechanism – must be exposed. We must rebel against such politics-as-usual.”

– James Hansen, “Never-Give-Up Fighting Spirit,” November 30, 2009.

“Cap and trade with offsets … is astoundingly ineffective. Global emissions rose rapidly in response to Kyoto, as expected, because fossil fuels remained the cheapest energy.”

“Cap and trade is an inefficient compromise, paying off numerous special interests. It must be replaced with an honest approach, raising the price of carbon emissions and leaving the dirtiest fossil fuels in the ground.”

– James Hansen, quoted in “Copenhagen summit: Is there any real chance of averting the climate crisis?,” The Guardian, November 28, 2009.

“The alternative approach is Cap & Trade, or perhaps more honestly Tax & Trade, because a ‘cap’ increases the price of energy, as a tax or fee does.

“Other characteristics of the ‘cap’ approach: (1) unpredictable price volatility, (2) it makes millionaires on Wall Street and other trading floors at public expense, (3) it is an invitation to blackmail by utilities that threaten ‘blackout coming’ to gain increased emission permits, (4) it has overhead costs and complexities, inviting lobbyists and delaying implementation.

“The biggest problem with [cap and trade] is that it will not solve the problem. It may slow emissions, but because of the long lifetime of atmospheric CO2, slowing the emissions does little good. As long as fossil fuels are the cheapest form of energy they will be used eventually. There is no hope that cap and trade can get us back to 350 ppm CO2.”

– James Hansen, “Strategies to Address Global Warming,” 2009.