In early February this year, scores of protesters, all bundled up in sweaters and thermal hats, gathered outdoors in Oakland, California to contest the Keystone XL Pipeline: a supranational gas pipeline pursued by the Obama Administration. This movement, inspired by the terror of escalating carbon emissions, is accompanied by hundreds of similar protests throughout the country. And while the Obama Administration, amid stalling a final decision, continues to favor building the Keystone XL Pipeline, those who engaged in the impassioned, environment-concerned protests nationwide may have received a breakthrough. Debatably.
Colloquially referred to as the “Carbon Plan,” the Obama Administration has proposed a daring goal: cutting carbon pollution from major power plants by 30 percent by 2030. This is a revisit to the cap-and-trade stratagem pursued (but abandoned early) in 2009. A subsidy-heavy approach, cap-and-trade is a scheme that incentivizes states to independently meet a ceiling of monthly emissions by using cleaner technologies. If states do not meet their goal, they would have to pay to buy “credits” to warrant the release of extra emissions. Reviled by some critics who argue that this policy is some sadistic game of free market capitalism where pollution is the good demanded on the market, the cap-and-trade policy has had a disagreeable past, especially with the Republican party. Yet the cap-and-trade policy proves to have certain advantages: specifically, companies being dis-incentivized to pursue markets that release tons of pollution.
Comparably, coal emission protesters such as those of the Keystone XL Pipeline may show reasonable skepticism towards this policy. The United States has failed to meet the goals set decades ago by the Clean Water Act and Clean Air Act. The Obama Administration (and the national government) is notorious for hyperbolic word-play and twisted, propagandist optimism regarding future environmental plans. But history aside, the “Carbon Plan” may prove to have some details worth addressing.
The “Carbon Plan” isn’t just, as widely assumed, a plan regarding major power plants. It sets incentives for states to enact protocols that mandate safer technology. This seemingly long-term approach may be an answer to the environmental problems of the modern day, but namely coal-heavy states object to this federal pursuit. For them, a direct tax on coal companies based on their carbon footprint would be a more effective way to reduce the negative externalities of coal emission. Kansas, Missouri, West Virginia, and others directed their own environmental agencies to create independent plans; the fact that these measures were enacted before the specifics of Obama’s carbon plan demonstrate a real distrust of federal government. If anything, it can be safely concluded that there exists a nation-wide distrust of federal components regarding coal regulations.
Cap-and-trade, however, seems to be contradictory to the Obama Administration’s praise of “small business” and “the middle class.” Apart from political critics that would assail the Obama Administration for abandoning this goal throughout its entire policy apparatus, a political observer may easily find cap-and-trade to be antithetical to small businesses. Since emission caps operate lower than a company’s optimal profit level, businesses have the incentive to purchase more permits. But since capital is needed to purchase expensive permits, only larger businesses are able to exist comfortably in a cap-and-trade environment. Not only does this shut out smaller businesses, but, in the long run, supports the growth of larger, mega-coal companies. Creating oligopolies would only bastardize the cap-and-trade program because companies with less competition would be able to use excess profit to purchase more permits and release more pollution. If anything, the cap-and-trade policy proves questionable in its contradictory nature relative to the Obama Administration’s other inspirational goals.
Whether a proponent or protester of Keystone XL, a coal company proprietor, or an advocate of less “big business,” one should honor the environmental concern shared by the federal government. But the solidarity ends fast; cap-and-trade policies may not only be inefficient comparatively to proportional carbon tax, but also may hurt the future goals in the long run by circulating power only through a few super-charged businesses. And the plumes of thick, black smoke rise into the air, we ought to realize: we do not have all of eternity to muse over the carbon problem as the ozone layer slowly chips away.
Peer Reviewed by Jim Huang of Yale University