Thursday, January 20, 2011

Green Graft

. Thursday, January 20, 2011

This doesn't strike me as a very large problem, but it is interesting:

The European Commission suspended trading in greenhouse gas emissions permits on Wednesday for at least a week after the theft of permits worth millions of euros via online attacks. ...

The attacks raised new questions about the viability of Europe’s main tool to combat a rise in greenhouse gases in the atmosphere.

The stolen permits are part of Europe’s effort to cap the amount of carbon dioxide, the main greenhouse gas, that companies may emit each year. Europe’s system is the world’s largest market for greenhouse gas emissions credits.

Companies exceeding their emissions quotas buy certificates from companies that succeeded in shrinking their carbon footprint by, for example, adopting lower-emission technology or modifying production in other ways.


This is not the first problem that Europe has had with its cap and trade system, however:

Europe’s system has had a rocky ride since trading began six years ago, including extreme volatility, tax fraud, recycling of used credits and suspicions of profiteering, in addition to online attacks.

One year ago, swindlers used fake e-mail messages to obtain access codes for individual accounts on the national registries that make up Europe’s system.


This is all pretty low-level theft, but in small ways it does undermine the integrity of the system. This is one reason why most technocracy-minded folks prefer straight carbon taxes rather than cap and trade. When cap and trade works well it mimics carbon taxes, but it is prone to rent-seeking, inefficiency, and (apparently) fraud. Carbon taxes have fewer moving pieces and they're more difficult to game.

More broadly, cases like these demonstrate that reaching an international agreement on climate change isn't the whole battle. Preventing leakages, inefficiencies, and poor incentives may be just as difficult, especially since states with weak or corrupt domestic institutions (e.g. China, India) are involved. It's a very real problem, but it isn't discussed very often.

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