John McCain presented his plan to combat global warming as he stumps through the Pacific Northwest. He is presenting his plan as relying on market forces to decrease greenhouse gases. He notes that for the last century we have achieved tremendous benefits from our use of oil and gas, but the costs in environmental damage were not taken into consideration. (Link) 

His plan is to cap greenhouse gas emissions and set up a cap and trades system of carbon credits that businesses could buy from ‘those who find a cleaner way of doing business’. There are some serious problems if this is all he has to his global warming plan.

Let’s start with how he is going to award credits. Are they awarded to current polluters based on how much you pollute determining how many credits you receive? How many credits do I get as an individual? I certainly would want my share of credits that I could trade to make some money.

How do you determine what credits you can buy? Can I plant a bunch of trees on my property and sell a carbon credit to a big utility? What happens when I decide to chop the trees down for fire wood? Do I have to buy my credits back? What happens if the tree just gets old and dies? Do I become liable for damages to the environment?

Some of the cap and trade programs like the ones in Europe allow companies to create credits by helping other companies become more efficient. A company may go to a Chinese company and make their production process more energy efficient. The Chinese company gets new equipment that consumes less energy and the European company gets the carbon credits to offset their emissions. I have a little trouble understanding how this really cuts down on greenhouse gases. The European company hasn’t cut down, the Chinese company can increase production and maybe produce more pollution, and the Europeans have increased the efficiency of a country that competes with them. If China grows faster because of this increased economic support, doesn’t that create even more pollution?

I could see cap and trade used in more a limited context. Lets say we wanted to reduce greenhouse gases by closing all of our coal-fired power plants over the next 40 years. We could issue credits each year to the existing plants based on their current emissions. Each year we reduce the number of credits so that emissions are reduced by 2.5% each year. Each plant could reduce that amount of coal it burns each year or a few plants could shut down and sell their credits to other plants. The market would determine the most efficient way to eventually close all of the plants. Sort of like a game of musical chairs. Cap and Trade systems that allow the creation of new credits (‘new chairs’) would not be effective.

A better solution would be a carbon tax. A carbon tax would add the cost of pollution to the cost of the product. This could be put on both fossil fuels and products made from fossil fuel energy where the fuel source was not originally taxed; ie imports. You can’t put a carbon tax on fuel only in this country because it would drive manufacturing off-shore to avoid the tax. For example, if you taxed natural gas used to produce fertilizer, but didn’t have a tax on imported fertilizer; you would drive a lot of production off-shore.

Providing cash credits for alternative energy would help increase the amount of emission free energy. Providing credits for solar and wind energy will eventually drive down the price to the point where they also become economical. A small carbon tax would make these sources economical sooner. Maybe use the money from the carbon tax to supplement alternative energy.

The government should support all forms of clean energy. We are going to need a lot of it to replace all of our fossil fuels.  Nuclear energy should be part of our solution. We currently generate 20% of our electricity from nuclear. France generates over 80% of its power from nuclear. McCain does support nuclear power. He acknowledges that there are “drawbacks” including transporting and storing nuclear waste. I would like to here more on his plans for getting new nuclear plants built in this country.