Congress is rushing to implement a cap-and-trade system to reduce greenhouse gas emissions. I fear this approach is flawed. I doubt cap-and-trade will reduce emissions. I know it will create a new complex and expensive unregulated carbon market with the potential for massive manipulation. It could gouge consumers and businesses worse than the Enron led energy deregulation earlier this decade.
In theory, a cap-and-trade system sets pollution limits (the"cap") and doles out allowances through offsets that can be bought and sold to meet the targets (the "trade"). However, any polluter can indefinitely avoid this cap by spending allowances and buying overseas offsets. Wall Street is wildly enthusiastic about cap-and-trade and projects the biggest speculative market in history. I fear it will create a carbon bubble that will dwarf the recent financial services bubble. This approach will put the American economy and taxpayers at risk.
The recent Wall Streetled financial crisis should have been a clear lesson to Congress. Yet, cap-and trade would again create a market that Wall Street could manipulate with few restrictions and weak oversight. We can look forward to carbon offset derivatives futures tranched into collateralized debt obligation insured by credit default swaps mimicking the recent mortgage trading by AIG and others. That is a dangerous prospect.
The cap-and-trade legislation recently passed by the House fails to adequately protect consumers against rising energy costs. I voted against the bill in part because it gave away allowances. If the bill had auctioned allowances, a U.S. cap and-trade market could have raised $846 billion by 2020. We could have used this revenue to protect consumers and small businesses, invest in clean energy technology, and move toward energy independence. I believe we must take immediate and meaningful action to reduce greenhouse gas emissions or face the impact of climate change in Oregon, the U.S., and the world. Instead of a cap-andtrade system, we should set a strong cap on emissions, inventory our pollution sources, issue permits, and fine polluters who don't meet their targets. We have used a similar approach since the 1970's under the Clean Water Act to clean up our waterways and rivers and it has been phenomenally successful.