Cap and Trade—A Yellow Dog idea?

Cap and Trade is a concept allowing the free market economic system to establish the value of pollution. A pollution tax is another method to ascribe a monetary cost to pollution. Both seem reasonable alternatives, yet neither is purely effective in establishing true value under the free market.


Simplified, a free market system allows a price/value to be set for a product that represents close to its true value. It’s basic supply and demand. Buyers and sellers essentially set value. Outside influences, of course, happen but theoretically the system works well and has for a very long time.


But along comes something that gummies up the works. Pollution. We want clean water and air. Producers of product pollute sometimes. Pollution has a cost, sometimes huge and sometimes not, but it doesn’t factor into supply and demand unless that cost is reflected in price. If Seller doesn’t have to include pollution cost into price, buyer doesn’t have to pay for it. Society suffers; taxpayers often pay.


Most of us agree that pollution is bad and needs to be controlled. We don’t want to be forced to drink polluted water.  So, along comes government (experts and bureaucracies) and says, “we’ll set a cost for pollution and it’ll be paid by the producer to allow him to pollute (wouldn’t matter much if it was  paid by the consumer as a cost to be free from pollution). That cost is now added to the price of the product.


Both methods of valuing pollution costs, tax or cap and trade, have been around for decades. Tax is simply set by the government. Cap and Trade allows some free market influence in the setting of the pollution costs because producers are assigned units of pollution and can trade those among themselves.


The interesting thing is: I would have thought from the noise coming from fiscal conservatives these past few years that cap and trade was a liberal, left wing, Yellow Dog concept allowing big government interference in the market. Truth is, cap and trade came out of conservative thinking years ago as a better way to control pollution without so much government interference as a tax would cause.


The battle really has little to do with the merits of cap and trade. The battle is basically over whether there should be pollution control at all, or to what extent. It’s the “global warming” fang against fang thing. Those on one side are derisive of the other side.


 It’d be nice if people would own up to their true reasons for objecting to something. But, then, we’d all be educated as to what’s going on and that’d never do, would it?