The first step of setting the cap will inevitably fail. Deciding where to set the cap and how much to reduce it over time is a political process and will involve the various corporations lobbying to set the cap as high as possible.
Energy is a big money business and there are ample examples of companies acting unethically to make more money. The most notorious example is Enron, an energy company that produced artificial blackouts in California to raise the cost of energy. Enron was among the companies advocating for cap and trade legislation during the 1990s.
Billionaire and investor George Soros said that the cap and trade system “can be gamed; that’s why financial types like me like it – because there are financial opportunities”.
Corporations will look for the financial opportunities and the loopholes which will make them more money while failing to reduce emissions.
Further, the companies that have historically polluted the most will be rewarded with the most permits to pollute. These permits will be given away for free not only for past pollution, but they will be given away to corporations that claim to reduce their emissions. A company could do something that adds carbon to the environment, but then do something that allows them to earn more permits, thus allowing even more carbon into the environment.
That happened in Malaysia where the Sinar Mas corporation cut down forests. Forests are brakes on climate change, taking in carbon dioxide. The company then took the razed land and planted palm oil trees. Although the trees didn’t make up for the ecological damage the company caused, they earned permits and was able to pollute more than the cap should have let them.
Companies could also exaggerate how much carbon they emitted or were planning to emit. By embellishing the numbers, they are able to claim they are lowering their emissions without doing anything and, in the process, earn more permits.
With permits being tossed around like that, the cost will jump around while energy costs for consumers rise. This scenario already occurred in Europe after cap and trade legislation was passed. During this time, carbon emissions actually rose.
Even after the cap was reset, the European market was filled with cheap permits, many of them easily obtained in the third world. Companies had no incentive to cut emissions, but were able to continue to pollute within a legal framework. It’s likely that the same scenario could happen in the United States.
Viewing cap and trade as a real environmental solution is dangerous because it could pacify companies, governments, and citizens from looking for more effective solutions.
My comment uses very large generalizations to make its point so look past those. This is an attempt at pinning down your audience. Conservatives do not like big government and liberals do not like big business. The idea of cap and trade is generally considered to be more liberal and so liberals naturally accept it. On the other hand, conservatives mistrust government interference (sometimes called regulation) and are more willing to trust big business than government. My point is that the liberal audience already agrees with you and this argument would be very effective for them. Conservatives are not completely blind to corruption and dishonesty but are going to be looking for reasons to discount your chain of reasoning. Be careful in how you present your argument.
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