Boxer Pushes Failed EU Cap-and-Trade Scheme

Published June 1, 2007

U.S. Sen. Barbara Boxer (D-California), head of the Senate Committee on Environment and Public Works, told reporters at an April 18 National Press Club speech she will push for a European Union (EU)-style national cap-and-trade system to force reductions in carbon dioxide (CO2) emissions.

Experts who have reviewed the EU cap-and-trade experience note the scheme has largely been a failure.

“I will hound [the Bush administration] on this week after week after week after week,” Boxer told the media at her speech. “It doesn’t take China doing anything. It doesn’t take India doing anything. It doesn’t take Congress doing anything. … I intend to move to make sure the administration uses its powers” to cap and reduce CO2 emissions, Boxer said.

EU Plan Ambitious

In 2005, the EU launched a multi-country CO2 trading system that covers some 11,000 industrial facilities that emit greenhouse gases.

Each of the 15 countries that were members of the EU when the Kyoto Protocol was promulgated in December 1997 has its own emissions target. Those countries can trade emission credits with each other or with the 10 countries that have joined the EU since the global warming treaty was adopted.

The goal is to meet their combined Kyoto-imposed target of an 8 percent emissions reduction below 1990 levels.

EU Emissions Outpace U.S.

Contrary to claims by many global warming activists, the EU’s command-and-control scheme has resulted in faster-rising CO2 emissions than in the United States, which has largely encouraged free markets and innovation.

Greenhouse gas emissions per unit of gross domestic product fell by 7.5 percent in the United States from 2000 to 2004, the most recent period for which reliable data have been assembled. The European Union reduced its greenhouse gas intensity by only 4.5 percent in the same time period.

Overall U.S. greenhouse gas emissions grew by only 1.3 percent between 2000 and 2004, while EU emissions grew by 2.1 percent.

The number of EU nations failing to meet their Kyoto targets further demonstrated the problems of imposing carbon reduction mandates from the top down. According to EU statistics, Austria, Belgium, Denmark, Finland, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Slovenia, and Spain are failing to meet their Kyoto targets.

Three of the EU nations are exceeding their Kyoto targets by more than 20 percent. Three others are exceeding by more than 10 percent.

All Cost, No Benefit

“The EU emissions trading scheme is one of the worst possible models to study,” said Iain Murray, senior fellow at the Competitive Enterprise Institute. “It hasn’t worked at all. All it has done is raise the price of energy to consumers without having any effect on emissions. Meanwhile the utilities have enjoyed windfall profits. In essence, what they have done is legalized a cartel.”

Referring to the tendency of businesses to try to benefit from government regulations, Murray explained, “The EU cap-and-trade system has been a rent-seekers’ dream. It is not surprising, therefore, that some American utility companies have supported [imposing] a similar scheme in the U.S. They have seen how much money the European utilities have made on it, and they want to be in on the act, also.

“Rather than create an economy that encourages technological progress, the EU cap-and-trade scheme has created an unstable market that discourages technological innovation,” Murray added. “It has also put small enterprises at a disadvantage, as they have fewer resources to navigate the bureaucratic nightmare that has resulted from the scheme.”

Bonner R. Cohen ([email protected]) is a senior fellow at the National Center for Public Policy Research in Washington, DC and author of The Green Wave: Environmentalism and its Consequences, published by the Capital Research Center.