Your article makes one very large presumption that is NOT correct: carbon trading is in fact not a tax at all.  At a very basic level, the primary difference is that taxes are paid to the government and carbon emission offset costs are paid to parties trading on the market.  In theory, if not also actuality, such a market-based system is significantly more efficient in an economic sense.  In short, the trading system makes it cheaper to control emissions on both the level of the firm and the national economy.

Of course, since the overall limit of permits on an emissions trading market are usually limited by a government then it tends to be a hybrid system.  However, the current US carbon trading system is voluntary and managed by an NGO, the Chicago Climate Exchange.

That said, your article tends to be a bit confrontational and yet you shift your target.  Is it the bureaucrat or consultant who is guilty of the carbon footprint assessment?  You mention both with your accusations.

Bottom line is that you critique the system but offer no alternative that would be better.  This tends to imply that you raise issue with emissions regulation in general, not carbon trading in specific.  

J. Pittman
Ecological Economist

>Bottom line is that you critique the system but offer no alternative that would be better.

Umm no - obviously you did not follow the link to my previous post on the subject.

The alternative I favor is regulation, public works combined with a carbon tax.

And emissions trading is considered by most economists to be very similar to carbon trading, when considered in the abstract. The "platonic form" without giveaways all the things I described is:

One or government body (or many via international treaty) decide on a limit on carbon emissions, to be reduced each year.

Carbon permits are required mainly (but not exclusively) for fossil fuels. To keep this post short I will focus on these. Permits are required for every unit of fossil fuel produced within the jurisdiction, or imported  from those outside it without similar rules. Similarly imported goods produced outside the treaty area require permits for the best  estimate of embedded carbon emission (carbon emitted to produce them).

These permits are auctioned off by an agency of the government or treaty organization.  The price of these permits is then included in the price of the fossil fuel sold. Consumers pay the price of these permits both in the fuel and electricity they buy directly, and in added costs for consumer goods.

Thus they work almost identically to a carbon - in theory. The reality differs so much from this, that apparently there are carbon trading advocates who don't even realize that in theory carbon trading is a varation on Pigovian taxation.

It seems like the problems you cite are all problems with implementation, rather than problems that are fundemental to the idea of a cap-and-trade system.

It is not surprising that there would be problems with a brand new market like carbon credits.  It is, as you have noted, an open door invitation to corruption and giveaways.  But this seems to be because it's a new and poorly defined system with little oversight.  Similar levels of corruption are quite possible with any government program, including (and especially) direct regulation.

So, there are problems, and they have to be addressed.  But I have to wonder if it would be more productive to address the problems that exist with the system currently being established, demand oversight and establish feedback mechanisms, than to simply declare all carbon trading to be fundementally bad.  Are you sure that you're not throwing out the baby with the bathwater here?

>Are you sure that you're not throwing out the baby with the bathwater here?

Yes - because the differences in practice between carbon trading and carbon taxes are really severe. And it is not as though we should expect carbon trading to work significantly better than carbon taxes.

As I said in the post on Carbon taxes - we can't depend upon "giving carbon a price" in any case. The primary means of reducing carbon emissions, of leaving fossil fuels in the ground has to be regulation and public works to jump start the infrastructure. "Giving carbon a price" is the final step, a way to refine the results and avoid micro-management. In that context the difference between a "perfect carbon tax" and a perfect "carbon trading system" would not be great. But carbon trading is more complex, less transparent - it is simply far more subject to political manipulation.   Kyoto was not originally expected to include carbon trading. It was added to win the concurrence of the U.S.  We in the U.S. never ratified the treaty, but in the meanwhile a huge number of stakeholders developed a self-interest in  carbon markets. Emissions trading has been one of the great distractions within the treaty; it is probably one of the reason many Kyoto signatories won't meet their obligations.

i prefer a carbon tax to an trading system, however, the carbon tax does offer its own set of problems, and weaknesses not present in a trading system.

primarly, a carbon tax is easily repealable.  sure, you will have industries that benefit greatly from a carbon tax, and won't want to see it repealed, but you will have many more who suffer from it. you will winners and losers in a trading scheme as well, but what you won't have is such a wide distribution of stakeholders.  carbon trading permits represents property in carbon emission, and these permits could be bought and sold by anyone. this is america--"property rights" are sacred. furthermore, if the trading scheme is set-up to return dividends to the general populace, you have about 300 million stakeholders who have property rights in the carbon sink (ie:our atmosphere), who might object to a repeal of the system.

you  could approximate the latter example with a payroll tax refund, but taxes are manipulated much easier than private--or even commonly held--property.

just some thoughts...

It is crazy to attempt to create a tax/trading system based upon something that it is virtually impossible to quantify. The politicians are avid for this because they can use it as a milch cow.
Tax something that can be seen - that digusting Lincoln Navigator and its ilk would be a good start.
Give people grants or tax credits for taking up clean options - solar or wind.
I realise that the huge distances travel involves in your country require vehicles but surely they can be smaller and more efficient.
In Britain there is a lunatic who wants to spend 25bn on a replacement for Trident, the same ass who raves about global warming. Think how much of a clean up 25bn would buy.
Very large amounts of cash are going to be required to assist displaced people - though, of
course, you could buy a lot of bullets to keep them at bay.
Incidentally, some of us find that Lincoln ad
blasphemous.

Emissions trading and Pigovian tax systems are two different things.  In the case of the tax, the revenue is levied at a fixed rate and received by a governmental agency and distributed in a way that provides equal benefit for all.  Emissions trading systems provide revenue directly to those parties who are reducing emissions and are subject to price fluctuations.  

What precisely do you mean by regulation that includes "public works"?  This is quite vague and I am not sure that language has the meaning that you intend.

Carbon trading IS a form of emissions trading so they are quite specifically the same thing, not just considered to be so.

While emission credits are sometimes auctioned off at the launch of a trading system, they are then exchanged for payment between parties in the market or retired by other parties.  It is not accurate to suggest that the only way to obtain a permit is to purchase it from a governmental agency.  

and get a humanitarian corporation to pay for it. So I can turn around and buy some seeds and some food for orphans. Is that so hard? Throw in a few sunovens so I can cook the food.

Now expand this to the whole village... so we need some cash, can't we guilt some of these game playing folks into at least supporting our side of the game...the part that's not fixed.

Where our activities  ARE a plus... or can you find where this becomes a boondoggle? With Haiti I don't even know where to post this... food, energy, environment, politics... please don't get too hung up on the Hummers versus Prius's ... there is another world out here.

Trading isn't the problem.
The problem is offsets.

Full Auction Bankable/Tradable Permits however would be ideal.

Then use some of that revenue to create Carbon Reduction Grants.

-David Ahlport