TCS Daily

Voluntary = Mandatory

By Ryan H. Sager - February 15, 2002 12:00 AM

If George Orwell were alive today to sum up the Bush global warming plan, he might boil it down to three words: Voluntary Is Mandatory.

That's the message that is readily apparent to free marketers concerned that George W. is going squishy on The Environment just like his father did more than a decade ago. While the carbon trading scheme that Bush proposed Thursday might start out voluntary, there isn't a serious person inside the beltway who believes it could stay that way over the long run if it were to be implemented.

Voluntary is a nice word as far as it goes, but in politics, where voluntary arrangements are subject to the push and pull of vicious partisan fighting day in and day out, that isn't very far.

The most serious problem in that respect, of course, would be the Bush administration itself. The Bush White House clearly feel that it is vulnerable on green issues, and seem willing to tack significantly left for Mother Earth any time their poll numbers indicate a threat.

Bush advisor Karl Rove and company have seen Bush stand on principle for the most part so far during his time in office, but they remember how close the 2000 election was and how crucial environmentally-conscious suburban votes were - and they clearly aren't counting on ozone-high approval ratings lasting for another three years. The greater a threat the administration perceives on environmental issues, the further towards mandatory the voluntary system would drift.

Another reason a "voluntary" carbon trading scheme can't be taken seriously as such is that the government has a shaky grasp on the concept of volunteerism. In fact, to the government, voluntary is nothing but a code word for "about to be coerced." Much like with the Mafia, if they suggest you do something voluntarily, you can be pretty sure there will be consequences if you don't volunteer.

The states have tried the "voluntary" trick on environmental issues a number of times. In the late eighties states and municipalities began pushing voluntary recycling programs. Of course, if anyone had wanted to recycle voluntarily they would likely have already been doing it. So when these voluntary programs predictably saw few takers, many towns and cities made their programs mandatory. Much the same thing happened in the mid-nineties with emissions testing for automobiles.

The federal government has usually stuck to command-and-control regulations on environmental issues - aside from a few "negotiated" industrial cleanups - but the feds know how to get what they want without ostensibly mandating it. For example, states are plenty free to walk away from the minimum drinking age of 21 -- provided they're okay with losing billions in federal highway funds. And Smith & Wesson didn't have to put child-safety locks on all their guns -- so long as they were happy to spend millions defending themselves against government lawsuits in court.

Above all, however, the most important reason that a voluntary carbon trading system would not remain voluntary is that there could be no possible reason to participate in it unless it was expected someday to become mandatory.

Reducing carbon emissions costs money. If it didn't cost anything, companies would have reduced their emissions by now if only to get people who don't shower enough to stop bothering them. No company would ever spend money to earn a credit by reducing emissions, or spend money to buy a credit, unless they thought that someday those credits would rise in value. And the only way that they can ever rise in value is if emissions are capped. It's that simple.

Any investment by a company in a voluntary carbon trading scheme is the equivalent of a bet that politicians will eventually cap emissions. Companies that are willing to make that bet will participate. Those that aren't as sure will either stay home or hedge their bets.

And therein lies what is perhaps the worst danger of a voluntary carbon trading scheme. By putting carbon credits in the hands of energy companies - credits that will be worthless unless the government clamps down on CO2 emissions - the plan would actually create a growing constituency in favor of a carbon cap.

Lest this sound like paranoia, such a constituency has already begun to emerge, at least in part due to a completely private carbon trading system. Enron, of all companies, led the market in creating such a system - basically a futures market fueled by speculation over a mandatory cap. Credits sell for about $1 per ton, but could skyrocket to as much as $150 per ton if a cap were to be imposed. No wonder companies with lots of credits, like Cinergy and DuPont, are already lobbying heavily for restrictions.

Perhaps, in the rosiest of scenarios, this is all a cynical ploy on the Bush administration's part. They know that the Democrats won't go along with any plan that "lets corporations off the hook" by making carbon reductions "voluntary." Maybe the White House simply expects the idea to get bogged down in partisan bickering and never again see the light of day. Maybe that's even why they added the peculiar part about tying emissions targets to gross domestic product - all the better to muddy the waters. It would almost be brilliant if it weren't so dangerous.

Ryan H. Sager is a freelance writer based in Washington, D.C.

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