Emission trading: in conformity with market principles?

It is often argued that CO2 emission trading is in conformity with market principles. However, if we take a closer look, it is not. It requires a prior act of creating and distributing (property) rights (to emit), where no rights existed before. Only governments can do so.

In Europe, national emission ceilings are the outcome of negotiations between the EU member countries and other countries which will join the scheme. Subsequently, individual countries are free to distribute the emission rights nationally according to schemes to their liking.

The proponents of Kyoto admit that the European mini-Kyoto is only a tiny first step to achieve a substantial reduction of man-made greenhouse gas emissions. Many more follow-up steps will be required. Estimates range from ten to thirty additional Kyotos in order to make a real dent into emissions. Of course, in the beginning costs will be relatively low, because it concerns the collection of low hanging fruit. But as the process progresses, the screws will have to be tightened in every successive phase and the costs will rise exponentially.

Countries that are presently exempted form any emission cuts, such as China and India, Brazil and Mexico, will have to join at a later stage (after 2012). Ultimately all 193 countries in the world have to join in order to eliminate loopholes in the system. It should be borne in mind that their allocations will have to be accommodated within a shrinking total of available emission allowances.

Some Kyoto adherents foresee an evolution of the system, whereby in a couple of decades the worldwide distribution of CO2 emission rights will be taking place on the basis of equal rights per capita. Such an allocation would be in conformity with traditional UN egalitarian philosophy, to which some countries, however, have explicitly taken exception, while other countries have remained conspicuously silent. It goes without saying that this would require a degree of central control at the global level which is unprecedented in the history of mankind.

Is it likely that 193 countries will be able to reach agreement on the worldwide distribution of emission rights in some ten to thirty consecutive negotiation rounds over the next few decades? If the pace at which (infinitely less painful) WTO negotiations are taking place is any guide to us, the answer is negative. What then about a more 'effective' alternative? If countries are not willing to voluntarily cooperate in order to reach a compromise on an overall accord for the worldwide distribution of emission rights, the only conceivable alternative solution is that it will be imposed on them. Unfortunately, this implies, first of all, that national parliaments will have to be excluded from the decision-making, because one cannot run the risk that these will obstruct the outcome of the 'negotiations' by their veto. Moreover -- and irrespective of support or disapproval of their parliaments -- even national governments should not be allowed to frustrate the successful outcome of 'negotiations'. That means that either some directorate of leading nations, or some group of permanent officials or autonomous body should be put in charge to prepare proposals. For practical reasons these proposals can only be marginally adjusted during the 'negotiations', because otherwise the whole package will fall apart. Subsequently, these proposals are expected to be officially rubber-stamped by all countries. All this implies that the only 'effective' solution to this problem will spell the end of both national sovereignty and democracy in such a crucial field as is the use of energy.

Of course, the smooth running of the scheme requires quasi-permanent preparation of new proposals, close monitoring by an army of inspectors which will have to operate worldwide, and sanctions in case of non-compliance.

As regards sanctions a parallel can be drawn with the EU Stability Pact, which stipulates that budget deficits of member countries should remain below 3% of GDP. But, as we know now, in this case sanctions are very weak and ineffective. Kyoto is a different ball game. The stakes are high. As Sir David King, scientific adviser to the British government keeps reminding us, the threat of global warming is more serious to the world than that of terrorism. In the same vein his compatriot, Sir John Houghton, the former head of the British Meteorological Office, who also served on the Intergovernmental Panel on Climate Change (IPCC), has compared global warming with a 'weapon of mass destruction'. Kyoto is aimed at nothing less than 'saving planet earth'. This implies that we should not shy away from radical measures to enforce compliance: zero tolerance!

But Kyoto's scientific base is still fatally flawed

Ironically, this huge bureaucratic moloch in the making is based on science which is fatally flawed. Recent peer-reviewed literature offers a spate of articles refuting crucial elements of the man-made global warming hypothesis, thereby undermining the scientific basis underlying the models and scenarios by the IPCC. These models and scenarios do not stand up to rigorous scientific analysis, while the extreme projections, the ones that make the best scaremongering headlines, are nothing but sheer fantasy.

But so far Kyoto has proved to be impervious to logic. Let's hope that its inherent loss of national sovereignty and democracy will concentrate the minds. Until then, Hayek will be spinning in his grave.