- The Foundry: Conservative Policy News from The Heritage Foundation - http://blog.heritage.org -

Global Warming Policies and the Perverse Incentives They Create

Posted By Nicolas Loris On December 21, 2010 @ 12:00 pm In Energy | Comments Disabled

[1]

Money is a powerful incentive. When it comes to global warming, governments all over the world have created policies that intend to reduce greenhouse gas emissions but have led to fraud, scams, black markets, and increased emissions. Mark Schapiro of Reuters reports on the unintended consequences [2]of European companies offsetting their carbon dioxide emissions by paying the Chinese to destroy a much more potent contributor to warming:

In order to offset their own greenhouse gases, companies and utilities in Europe that are subject to the emission limits of the Kyoto Protocol have been paying vastly inflated prices to Chinese companies to destroy hfc 23, and in the process have been providing the Chinese government with hundreds of millions of dollars in tax revenue to compete against Europe’s own “green” industries. European concern about this practice was a major source of contention during last week’s climate negotiations in Cancun, as the U.N. attempted to defend the integrity of the multi-billion-dollar global carbon offset market.

And in an odd twist, the incentives offered through the U.N.’s Clean Development
Mechanism (CDM) also appear to be stimulating production of an ozone-depleting refrigerant gas that has been landing in the U.S. black market. Investigations by the U.S. Environmental Protection Agency (EPA) and U.S. Customs and Border Protection have led to the conviction of several smugglers who have illegally imported the ozone-depleting refrigerant, hcfc 22, into the U.S. for sale to trucking companies, supermarkets, automotive supply shops, and other large-scale users of refrigerant gases. The illegal refrigerant is significantly cheaper than non-ozone-depleting refrigerants permitted in the U.S., a price discrepancy triggered partially by the large overpayments to Chinese firms that have led to an ample supply of hcfc 22 on the international black market.

That black market completes a global circuit unique to the era of climate change: From China’s industrial zones, the credits for the greenhouse gases—bought and sold as commodities on the global carbon markets—flow to European companies that need them to continue polluting at home, while the underlying ozone-depleting gas responsible for creating those credits flows to American companies seeking discounted refrigerants.

If you need any more indication that these policies are more about seeking profit than protecting the environment, China’s Deputy Director of its Clean Development Mechanism fund threatened to release the hfc gases into the atmosphere if United Nations removed the gas as an acceptable credit. Shapiro also details how the credit program [2]is increasing the production of other potent greenhouse gas emissions:

The offset credits paid to Chinese and Indian companies to eliminate the former, according to CDM Watch, have actually stimulated increased production of the latter—the ozone-depleting refrigerant hcfc 22, which is itself a potent greenhouse gas. CDM Watch has compiled records showing that companies in China and India have significantly increased production of hcfc 22 in order to receive funds to incinerate the byproduct gas, hfc 23.

This becomes an even bigger deal when governments implement policies that promote carbon-free, uncompetitive sources of energy. In the United Kingdom, for instance, David Cameron is reversing Margaret Thatcher’s privatized energy market in favor of a more state-controlled system with the possibility of a price floor on carbon dioxide. The plan would prematurely shut down older power plants in favor of a massive government spending project to increase the use of nuclear, wind, solar, and biofuels to meet carbon reduction targets. It’s an undertaking that cannot be done without government guarantees, says the regulator Ofgem [3]. Ernst and Young projects the transition will cost $316 billion [4]—a cost that will show up in consumers’ energy bills and later through higher taxes to cover the government’s investment.

And all this cost is for what? There won’t be any noticeable difference in emissions, and companies can pretend to go green and pretend to adhere to rules while others collect serious cash. Yet politicians in the U.S. are pulling wool over their own eyes when it comes to the facts, fraud, and inefficiencies of green policies in other parts of the world.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2010/12/21/global-warming-policies-and-the-perverse-incentives-they-create/

URLs in this post:

[1] Image: http://www.foundry.org/wp-content/uploads/money_stacks0902118.jpg

[2] reports on the unintended consequences : http://e360.yale.edu/feature/perverse_co2_payments_send_flood_of_money_to_china_/2350/

[3] says the regulator Ofgem: http://www.ofgem.gov.uk/Media/PressRel/Documents1/Ofgem%20-%20Discovery%20phase%20II%20Draft%20v15.pdf

[4] projects the transition will cost $316 billion: http://www.bloomberg.com/news/2010-12-15/cameron-energy-strategy-may-roll-back-thatcher-s-policies-to-cut-emissions.html

Copyright © 2011 The Heritage Foundation. All rights reserved.