June 30, 2008
Cap and Trade Worked for Acid Rain, Why Not for Climate Change?
One of the most often-repeated assumptions in the climate policy debate is that cap and trade, the preferred mechanism for reducing greenhouse gas emissions, worked for SO2 and acid rain, so it will work for GHGs. Sounds good. Until you take a second to think about the comparison.
Dealing with GHGs is a challenge of an order of magnitude greater scale and complexity. To see why, see the two graphics below:
First, here's a graphical representation of the Acid Rain cap and trade challenge:
Below the fold, you'll see a graphic representation of the global flow of greenhouse gas emissions, the challenge we have to deal with to avert potentially catastrophic climate change... (click to enlarge).
As you can see, the global climate challenge is obviously not as simple as the SO2 challenge, or indeed, any pollution reduction challenge we've faced to date. It won't be as easy as adding scrubbers or catalytic converters to smokestacks and tailpipes or burning low-sulfur coal and gasoline with new additives instead of lead. Those transitions we're relatively easy, required no major innovation, and allowed business-as-usual to continue in the electricity and transportation sectors in all meaningful ways (essentially same energy sources, same technologies, same consumption practices).
In contrast, what we're talking about today is fundamentally different: a full-scale transformation of our entire global energy system, consumption habits and more (agriculture, international deforestation, etc.). It's both an order of magnitude larger and more complex a challenge.
In fact, there is truly no parallel for this kind of transition in the history of pollution regulation. There may be no real parallel at all, but if there is, it will look more like major technological transformations in agriculture, telecommunications, or the transitions between major primary energy sources (wood/dung to coal to oil etc.) or transportation methods. None of those transformations were driven by taxes or regulations on incumbent techs. They were driven by innovation and the emergence of better/cheaper technologies, as well as major public investments in technology R&D, deployment, infrastructure and education. For more on historic examples of this kind of challenge, see our recent report Case Studies in American Innovation: A New Look at Government Involvement in Technological Development
It's long past time we put this comparison between acid rain and global climate change to rest.