More Most Important News

To follow up on the most important news of last week, check out the front page of Rolling Stone on-line at http://www.rollingstone.com. Of course they’re leading with a photo and story about the King of Pop. But look at the other lead stories to the right.

There it is again. Climate change. What, you don’t see it? It’s right there, not in plain sight. Look closely: Matt Taibbi’s story on Goldman Sachs’ manipulation of Wall Street and Washington ends with money, power and climate change.

Goldman Sachs and the American Clean Energy and Security Act of 2009? Really? Yes, really.

While Taibbi’s article is full of incendiary rhetoric, he’s got at least one thing right: Climate change is going to be big business (go to the last page of his article). And if cap and trade is going to be our initial tool for reversing green house gas concentrations, then the “trade” part of cap and trade poses some serious challenges.

Time for some plain talking. Cap and trade is a tax in disguise. This is not necessarily a bad thing. Rather it’s a solution to a political problem. We need a carbon tax. But it’s hard to create new taxes. So the ACES Act does the next best thing by making carbon more expensive via the cap, and it keeps the funds from that “expense” in the private sector via the trade. So far so good.

But here’s the problem. The assumption with cap and trade is basically, “regulation-bad, markets-good.” Markets are efficient; government is wasteful. Markets are nimble; government is slow. Markets are rational; government is, well, ideological. But none of this is necessarily true, or in the case of climate change, helpful. Markets can be gamed (so can government). Markets can go beyond nimble, to volitile. Markets as we have seen over and over, are anything but rational. In fact markets and governments are just different manifestations of human nature, which can be rational or bat-shit crazy.

Taibbi’s article in Rolling Stone spends most of its time beating up Goldman Sachs for gaming Wall Street and Washington. The article makes a lot of claims it never backs up – it’s just an article after all – but there are plenty of books out there doing that job. The take home is that cap and trade, done wrong, is a perfect target for the same kind of insider trading, short-selling, pumping and dumping, and otherwise unethical behavior that we’ve seen from Wall Street over the past two decades.

So we’re going to entrust our climate future to the same guys who deregulated the banking industry, gave us the dot.com and housing bubbles, engineered credit default swaps, and poured speculative gas on our peak-oil fire? Maybe we should re-think this one.

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