Thursday, June 7, 2007

G-8 OKs ‘substantial cuts’ in warming gases

HEILIGENDAMM, Germany - Group of Eight leaders on Thursday agreed on a plan calling for "substantial cuts" to greenhouse gas emissions. (AP)

I'm all for responsible management of the environment, but it doesn't seem that trusting our own government, let alone an international government will be able to determine what the "best" way to legislate any sort of reduction to green house emissions. If this doesn't seem like a financial post, bear with me. In the end, setting limits on emissions and implenting caps and credit systems creates an additional tradeable commodity on top of the existing market. That is to say, government is artificially creating "markets" where previously there were none, and the costs of playing in these markets will wind up being passed on to consumers. In Europe, misallocation of credits, favoritism, lobbying etc have created a system where some of the worst offenders have extra credits, and some of the industries that have made the most investment into improving still have to purchase additional credits.

Ironically, the costs of doing business have made it impossible for many businesses to compete with foreign products, even though they are the most efficient in the world. Not only that, but businesses have often taken the "market value" total credits alloted and passed those costs to consumers, rather than only passing the costs of credits needed above their alloted amounts. In some places in Europe, electricity has almost tripled. I'm not saying that we shouldn't do what we can to protect the environment, but it seems that the forces for change should come from individuals and innovation which will save us in the long run, rather than artificial means by more restrictive government.

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