Kellog(L) and Felli (C) at Beit Zatoun. Photo Credit/Zach Morgenstern

This April, Kathleen Wynne announced that Ontario intends to join California and Québec in a cap and trade carbon market. As greenhouse gas emission rates continue to increase and the Conservative and Republican parties continue to tie economic security with fossil fuel industry development, it can seem uplifting when governments do act. Considering this broader Canadian context that Wynne is working within, it could be tempting to laud her government for a heroic green effort.


Cap and trade seeks to limit greenhouse gas emission by setting a cap on how much individual firms can pollute. It also subjects pollution to market logic by allowing firms to sell pollution rights they don’t use to other firms that need to bypass their government-set caps.


So, is cap and trade a real solution?


At Beit Zatoun, a social-justice-event meeting house opposite Honest Ed’s on Markham Street, the answer that came out at a May 24 presentation was a resounding no.


"Carbon Markets and Neoliberal Capitalism: What is Wrong with Ontario's New Climate Change Policy? Why Should We Oppose it?", opened with a showing of a video in Annie Leonard’s The Story of Stuff series. Leonard criticized cap and trade policies for having too many, and often industry-specific, loopholes, which she terms “cap and giveaways,” and for allowing companies to sell pollution credits when they offset their own emission levels, even if the offsets only exist due to misrepresentation. For instance, she cites a company that was considered to have offset its pollution on the grounds that it planted new palm trees in Indonesia, even though it only planted those trees after running a mass deforestation project to make way for them.


Leonard’s critique was advanced by Professors Romain Felli from the University of Geneva and Paul Kellogg from Athabasca University, who both argued that it’s hard to solve a problem (climate change) with the system that created it (capitalism). Felli noted how cap and trade emerged as a market friendly environmental policy following Ronald Reagan’s cutbacks on more direct environmental regulation. Felli explained how cap and trade was created in the ’70s as an anti-pollution idea by UofT economist John Dales. He noted that Dales’ approach to pollution regulation effectively depoliticized the problem of environmental degradation by giving pollution rights to those who can pay and not necessarily those who need them.


Paul Kellogg’s talk, meanwhile, emphasized how cap and trade might, ironically, be a policy of interest to fossil fuel companies. He explained how until recently, Canadian energy giant Suncor had supported Alberta’s Tea Party-esque Wildrose party, but now has suspiciously taken a pro-carbon pricing stand. Kellogg noted that Suncor’s defense of carbon pricing interestingly emphasize taxing consumers and not just producers, hinting at how companies can supposedly clean up their public image while minimizing the costs for them to do so.


Kellogg also contributed to the broader dialogue on capitalism’s role in destroying the environment. He noted that the development of streetcars in North America was undermined by monopolistic automobile-related companies who were able to use their fiscal weight to ensure that streets and suburbs were built to best sell their products.


So, did the Beit Zatoun event succeeding in demolishing all illusions in cap and trade? Not entirely, but mostly. Romain Felli explained it would be hard for him to give an exact opinion on Ontario’s cap and trade plan as we don’t yet know much about it — i.e., where the cap will be set, what greenhouse gases it will cover and what industries it will cover. Since much of the criticism of cap and trade has to do with its corrupt and uneven enforcement, theoretically, a model could be proposed with a low, well-enforced cap that does make a difference in enforcing emissions limits.


However, this is where the argument that environmentalism and capitalism are incompatible comes in. The logic that encourages cap and trade policies is that it uses the logic of the market and thus will not alienate business in the same way that a cap and no-trade policy would. If the government’s goal is to appease business, however, it is likely to find itself under pressure to selectively enforce (e.g., the interpretation of Indonesia’s palm trees as an offset) or create loopholes in cap and-tradepolicy.

In addition, Cap and trade was not developed for dealing with environmental problems on the scale of climate change, leading its early proponent economists Thomas Crocker and the late John Dales, to become cap and trade critics. Crocker, who prefers carbon taxes to cap and trade, argues that the uncertainty of how damaging climate change will be makes it hard to set a meaningful cap, and also questions how domestic cap and trade policies can truly challenge climate change as a global phenomenon.


Finally, climate change is not just something we need to end, but something we need to actively transition away from. As the speakers at the Beit Zatoun event noted, cap and trade allows pollution credits to go to those who can buy them. Under a non-market system, however, those credits could be allocated to industries that develop green infrastructure or, at the very least, industries that may play a key role in poverty alleviation. This could, in a certain sense, allow the harms created by emissions to be meaningfully offset.


That all being said, some may still be inclined to support cap and trade on the grounds that what’s wrong with it is essentially capitalism, and we can’t afford to wait for the system to change before addressing climate change. These proponents may want to consider a carbon tax as a modest alternative as, at least in theory, it does not allow for the same kind of cheating that cap and trade facilitates. In British Columbia, a carbon tax has lead to modest emissions reductions, though not nearly enough according to Kellogg.


Paul Kellogg, meanwhile, has proposed a broad alternative to cap and trade that is radical and non-capitalist, but is at least an approach that’s been used before. He describes his idea as a call for a “green Manhattan project” pushed for from below by social movements. Kellogg notes that the emergence of nuclear power, of which he is not a fan, was not the result of market mechanisms, but rather the state hiring physicists en masse to build an atom bomb.


While we should hope that Ontario’s cap and trade program will have fewer loopholes than past versions of the policy, the environmental movement has to remain vigilant in pushing for something more along the lines of what Kellogg envisions. If we were to take the war on climate change as seriously as America took the war on Japan, perhaps green technology can be perfected and proliferate through mass state investment.


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