Seeker Blog

This new April 2008 working paper [PDF] is by SeekerBlog reliable sources Michael Wara and David Victor — of the Program on Energy and Sustainable Development at Stanford University. Excerpt:

This article reviews the actual experience in the world’s largest offset market–the Kyoto Protocol Clean Development Mechanism (CDM)–and finds an urgent need for reform. Well- designed offsets markets can play a role in engaging developing countries and encouraging sound investment in low-cost strategies for controlling emissions. However, in practice, much of the current CDM market does not reflect actual reductions in emissions, and that trend is poised to get worse. Nor are CDM-like offsets likely to be effective cost control mechanisms.

….Our argument is that the theoretical benefits of lower costs and broader engagement of developing countries through the extensive use of offsets are an illusion. They are based on the assumption that it is possible to administer an offsets system so that it rewards only bona fide reductions. This assumption is valid for only a fraction of the real offsets market.

This is excellent work — and compelling results. I hope that all the politicians pushing “son of Kyoto” deals will read it and think carefully about what they are proposing.

Unfortunately, this paper reflects the current trend of investing staggering amounts of intellectual energy attempting to fix a very bad idea — namely “cap and trade” — which is the essence of Kyoto. A revenue-neutral carbon tax will achieve the same results with far less cost and complexity [about 5 times less cost according to the most recent CBO study — more precisely, 5x less than cap-and-trade without a “safety valve”]. And without creating a whole new organized criminal class and their associated corrupt politicians, plus a state-size new bureaucratic empire.

Sadly that is exactly what will happen. Just like we still have a gigantic “Department of Agriculture” dispensing $270 Billion in income transfers to “poor farmers” while blocking the development of modern agriculture in Africa and other developing countries. Thank you FDR. It is impossible to kill off these monsters once they are created.