Cap and Trade

By Tom Campbell

California has adopted a cap-and-trade approach to global-warming gases, requiring utilities and businesses that produce such gases to purchase permits to do so, either from the state itself or from other producers who have been granted permits based on previous levels of output. This system is similar to a carbon tax, since the cost of a permit is equivalent to paying a tax. While not universal, California has engaged some other states and Canadian provinces in a pooled effort to trade the permits. A world-wide carbon tax is still a preferred approach, however, as it rewards improvements in technology that cap-and-trade does not.

As long as California requires companies to buy greenhouse gas certificates and competing states and countries do not, California’s employment will suffer. It is purely wishful thinking that “green jobs” will spring up in California to offset this effect. The environment in California is not made better than anywhere else on earth by our contribution to reducing greenhouse gases. So, this is not like saying we’ve created a better environment to live and work in California – as is the case, for instance, by our reducing smog. Green jobs will spring up wherever business conditions are most conducive for them to spring up and, for all the reasons detailed in the statement on California’s competitiveness, this is not going to be in our state.

What we can do, however, is to use the proceeds of cap-and-trade to make it easier to hire a worker in California. Instead of subsidies to the fast train, or to selected businesses, the proceeds of cap-and-trade should go to fund a greater earned-income tax credit under California state law. The result would be a boost in California employment, perhaps not enough to offset the brake on California employment from the cost of having to buy global-warming certificates, but at least something to offset that cost.

The above are statements on several public policy issues drafted by Tom Campbell, former US Congressman, former California State Senator, former Director of Finance for California, and currently Interim Chairman of the Common Sense Party. They are meant to initiate consideration of several important issues; they are not the official views of the Common Sense Party. Please feel free to submit your own thoughts on these issues on the Open Policy Discussion Page.