The Pope weighed in on Thursday with strong moral arguments in favor of addressing climate change. But in his landmark encyclical, he apparently bashed cap-and-trade as a means of addressing carbon pollution:
“The strategy of buying and selling ‘carbon credits’ can lead to a new form of speculation which would not help reduce the emission of polluting gases worldwide,” Francis wrote in his wide-ranging encyclical on the environment and global warming.
“This system seems to provide a quick and easy solution under the guise of a certain commitment to the environment, but in no way does it allow for the radical change which present circumstances require,” he wrote. “Rather, it may simply become a ploy which permits maintaining the excessive consumption of some countries and sectors.”
I have been a critic of cap-and-trade in the past, particularly the federal version proposed in 2009. The evidence to date for cap-and-trade at that point wasn’t great, with failed programs in Southern California and the European Union and a seeming success in the Northeast that had more to do with a technological fix than program design.
But I’ve been impressed with California’s efforts to implement it. First, it’s been executed well so far, with no apparent market manipulation and some real results in terms of emissions reductions. Second, it’s been an important backstop to other state climate policies, such as for renewable energy, low-carbon fuel, and energy efficiency. And third, it’s generated a lot of revenue (up to $4 billion this year) that will be used in significant amounts for pollution reduction in low-income communities, including for weatherization and affordable housing.
So why is the Pope a hater? My guess is that his criticism is more about the European cap-and-trade system, which did not work as planned and resulted in windfall profits for some sectors, particularly electric utilities.
I think if the Pope were to look closely at California’s program, he would come away with a better feeling about it. And in any event, California’s climate efforts involve much more than cap-and-trade. But to be sure, the program provides a critical safety net to ensure the state meets its 2020 greenhouse gas targets. It may not be as elegant as a carbon tax or as forceful as command-and-control regulations, but it will get the job done. And that should be worth some papal love.