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United States Science

Pollution Allowance Auctions 37

Posted by jamie from the high-school-good-for-something dept.
In high school debate, twenty years ago, I ran a case for auctioning pollution permits, the application of the free market to pollution. We did pretty well because there was nothing written against it. In the last week, it's hit the headlines. Wired points out that sulfur dioxide went on the market in 1993. Paul Krugman argues that the market fails in the case of local pollutants like mercury (though his research has been questioned). And after reading WorldChanging's take on pollution permits, I have to wonder, why aren't these sold on E*TRADE? If I want to take 5 tons of pollution off the market, why should I have to go through a broker? And if I buy 5 tons, what stops Congress from releasing 10 more tons tomorrow?
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Pollution Allowance Auctions

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  • Citizens (Score:4, Interesting)

    by UID1000000 ( 768677 ) on Thursday April 08, 2004 @12:54PM (#8804941) Homepage Journal
    I think that the majority of people haven't picked up on this yet, even though it's been around for 10 years. This is because there are still millions of blinking VCR lights...

    I agree with you, what is the purpose b/c the govt will turn around and release more. The govt is all for major industries that use pollutants, like energy sources, etc. If the public were too buy them all up they would turn around and rerelease more "blocks".

    Now let's suppose that a large group, like a co-op gets together and buys everything, all of the EPA auctions. Would society collectively turn it's head and say "hey, let's find a new source of energy, or a new source of whatever". I think that would be an interesting day...

    • Citizens have no power against gov't agendas (Score:5, Insightful)

      by Spamalamadingdong ( 323207 ) on Thursday April 08, 2004 @01:08PM (#8805119) Homepage Journal
      Conservationists have already tried to shield old-growth forest by buying the timber rights. IIRC, they were told by the Interior department that they could not do this; their purchase was a contract to cut, and if they refused to do so the timber would be re-sold to someone else.

      It's perverted for someone (like the Reagan and Bush administrations) to claim to support markets on one hand and the work to defeat them when they don't yield the result that they've pre-ordained.

      • If it was a contract to cut then the conservationists had no right to tie that land up forever. If it was a purchase of the land in question then they could do whatever they want.

        Presumably it was a contract to cut and that means the proper land owner was selling rights to his land but not selling the land itself. Also, one can assume that the rightful owner of that land generates income from selling those rights. Why do you want to deny that person income? If the conservationists want to protect the f

        • If it was a contract to cut then the conservationists had no right to tie that land up forever.

          If the land was cut, it wouldn't have trees ready for harvest for 20-40 years. That's hardly "forever", and why shouldn't the conservationists be able to e.g. market the recreation rights to the forested land instead of the timber?

          Presumably it was a contract to cut and that means the proper land owner was selling rights to his land but not selling the land itself.

          This is National Forest. The owners are the

          • Forests are managed, if you do not management correctly they become overgrown, which is not healthy. Thus if you are not going to cut the trees, you need to find some other way to get rid of the old growth so new trees can grow.



            • Yeah, I guess that explains why there were no forests until humans came along to manage them properly. How long have forests been on Earth? How long has man been here? Do you really think the forests need our brilliant management? I think that if the trees were able to vote on it, man would be de-chainsawed until we learned to be a little more respectful.
              • They either need our brilliant management or they need to be left alone completely. The fact is that unlogged forest today is much denser than unlogged forest of 100 years ago. For one particular example, look here [custerstrail.com]. These people retraced Custer's path through the Black Hills of South Dakota in 1874 precisely, and took pictures from the exact same locations as Custer's photographer. Unfortunately it's a little difficult to see from the sample pictures they have on the website, but if you can find an actu

                • The fact is that unlogged forest today is much denser than unlogged forest of 100 years ago.

                  Hmmm...You think that has anything to do with us decimating the bison herds and other grazing animals that used to keep the grasslands open? I think the real lesson isn't that we need to manage nature but that we need to exist within it and let nature lead us rather than vise versa.

                  When we put out the fires, the forest just keeps getting denser.

                  We attack and put out forest fires because logging corporatio
                  • I think the real lesson isn't that we need to manage nature but that we need to exist within it and let nature lead us rather than vise versa.

                    Simply put, people find it unacceptable when a forest fire goes out of control and burns thousands of houses, or when a cougar kills their daughter playing in the backyard. People aren't going away, and there are fundamental conflicts of interest that prevent man and nature from living together in perfect harmony. Perfect harmony in nature is the kind of life that t

              • The "Indians" used to manage the forests by burning. Today forest fires are taboo, so we have to manage them other ways. Of course before that lightening set fires once in a while to clear the forests.

                Mind as the other poster pointed out, there are many different forests, and all need different management. I'd tend to trust forest managers who have at least studied biology more than activists who general have not. Though the above is clearly not that case in all situations. Trees are a renewable res


                • This is a case of our knowledge outstripping our wisdom. We have the knowledge and technology to affect the forest in profound ways but not the wisdom to restrain ourselves from doing profound damage in the name of greed and profit.

                  Forest managers are trained to manage a forest so that the maximum board-feet of lumber can be extracted from it, not so that maximum forest health is achieved (although, the forest must maintain some degree of health to reach maximum output.) The "activists", as you call them,

                  • I disagree that private citizen are interested in the health of the forest. Some are, but a large number have been swayed by activists into supporting a position that isn't for the health of the forest. In many cases the result of what these "private citizens" want is more harmful to industry than helpful to the forest.

                    There are however many different forests, and each is different so it is unfair to everyone to talk about general cases and assume they apply to all. Just beware of the above when looki

                    • I disagree that private citizen are interested in the health of the forest. Some are, but a large number have been swayed by activists into supporting a position that isn't for the health of the forest.

                      And a large number have been swayed by propaganda into supporting a position which is only good for the industry, and only the industry's short-term interests at that. This says nothing about the merits of the strongest cases on either side.

                      Loggers are private citizens too. As are the people who buy the


                    • I disagree that private citizen are interested in the health of the forest. Some are, but a large number have been swayed by activists into supporting a position that isn't for the health of the forest.

                      Oh, I see. It's the activists who are swaying public opinion while corporations are just being good straight-arrows with no power brokering or influence purchasing at all. Those activists sure are a well-heeled bunch if they can out-PR corporations.

                      Frankly, it baffles my mind that anyone could see thin

                    • I started to read that link, but I got sick over all the biased propaganda there.

                      Yes, industry does have a lot of propaganda power. So do activists. To trust either with your information is a mistake. Activists have positioned themselves as the little guy that the "Big evil corporation" is out to get, it gets a lot of sympathy, but it doesn't make their positions more valid.


                    • I started to read that link, but I got sick over all the biased propaganda there.

                      There are none so blind as those who will not see.

                      If it doesn't fit your world view you immediately avert your eyes. I've seen plenty of biased propaganda on both sides of the environmental debate. I saw very little in that article or else I wouldn't have used it as evidence to support my point. In fact, it's very well researched and documented with footnotes.
                      You seem to be suffering from hardening of the ideologies. It'
            • Which forests are you talking about? Are you talking about abandoned farmland in Vermont, the high-altitude areas across California to Flagstaff and Show Low in Arizona, or old-growth rainforest in Alaska? They're different, you know.

              Even if the forests need management, it's far from obvious that clearcutting is therefore good for the forest. The species evolved in an environment where each generation of trees spouted and grew in the decay or ashes of the generation before. Timbering removes most of the w

    • It's that same government attitude that compels them to build more roads. Instead of understanding that there's a limited supply of road space, labour & material, they just keep on building & spending. This attitude is consistant all across the political spectrum.

  • They could make a rule... (Score:4, Interesting)

    by kabocox ( 199019 ) on Thursday April 08, 2004 @01:07PM (#8805100)
    This was meant for businesses not individuals. I wouldn't be surprised if 2 rules gets implemented that state: 1 Only those entities that release these chemicals may own these allowances. 2 Once the entity releases 0 amount in their pollution emission, the allowance will automatically revert back to the governmental pool.

  • Well, yeah (Score:4, Insightful)

    by Otter ( 3800 ) on Thursday April 08, 2004 @01:21PM (#8805286) Journal
    It is rather telling, isn't it, that WorldChanging finds the notion of putting one's money where one's mouth is to be such a radical notion? I'm reminded of wondering during all the fuss about anti-HIV pharamaceutical pricing why all these noble, selfless people never thought of reaching into their own pockets to save those lives that are so much more important than money. You'd almost think that their generosity was entirely limited to being free with other peoples' money.

    • money after mouth (Score:4, Informative)

      by SolemnDragon ( 593956 ) * <solemndragon&gmail,com> on Thursday April 08, 2004 @03:18PM (#8806887) Homepage Journal
      Didn't pay for it? Maybe you hang around with the wrong activists. Some people were donating at the same time that they petitioned and protested. Even my doctor is doing tht; he's even planning to retire over in Africa to help with time and energy. There are a LOT of programs right here in Boston working to help lower-income people in the US and all over the world get the meds they need to deal with HIV/AIDS, and i am amazed how many of those noble and selfless people
      are reaching into their own wallets to do it.

      My mum, for example, worked with RI project AIDS for a long time, most of my childhood, and she did that on a regular basis and taught the rest of us to do so. She also gave to other AIDS foundations, and if you really feel strongly about the idea that these lives are worth more than money, i can help put you in contact with charities who will help your donation go farther.

  • When proposed (Score:4, Informative)

    by nelsonal ( 549144 ) on Thursday April 08, 2004 @02:27PM (#8806171) Journal
    AFAIK these are traded on the futures exchanges, check the CME, CBOT, NY mercatile before you decide they aren't tradeable. There was a story about a group of school kids who raised money for a sulfer emisssion permit, that was then kept by the school reducing emissions at their onset. The EPA says [epa.gov] that anyone can buy NOx and SO2 permits including members of the general public, and they list several suspiciously non power company sounding names in the winners list (I'm pretty sure Bates College Environmental Economics doesn't operate a small coal fired plant).
    If you offer Cantor a reasonable return on their investment, I'm sure they would sell them to you (you do the math on how much they paid. Their contact number is listed on the broker page (and they bought 25,000 units). Enron (don't worry they sold the trading business to UBS) will likely have to short them (and then buy from Morgan or Cantor).
    • Sorry, Morgan bought 25,000 contracts, Cantor only bought 5,000. Both bought them for the purpose of reselling them for a profit so they will be looking to deal.

  • Why limited permits. (Score:3, Insightful)

    by MindStalker ( 22827 ) <mindstalker@gma[ ]com ['il.' in gap]> on Thursday April 08, 2004 @02:31PM (#8806237) Journal
    I always thought that selling license to polute should be priced at the extimated cost of cleaning up the polution. That way you can sell endless amounts of it, and use the money to clean it up, or the company would be smart and clean it up before it left the premises thus saving money.
    • The idea is that they are given (or sold, it makes no difference to the outcome just the relative incomes of the industry) to all the potential pollutors in the industry. Lets say there are 3 power plants in a vally and each emits 1 kg of SO2 per Megawatt. The citizens of the town decide that they are tired of SO2 pollution, and are willing to pay extra for reduced emissions (currently they draw 1,000 MW. The easiest choice is to limit output per company to 75 kg. This works well, but does not provide a

    • Re:Why limited permits. (Score:4, Informative)

      by sfjoe ( 470510 ) on Thursday April 08, 2004 @03:08PM (#8806759)
      I always thought that selling license to polute should be priced at the extimated cost of cleaning up the polution.

      Cleaning up the pollution is only part of the cost. The rest of the cost of pollution (increased asthma and other lung ailments as well as quality-of-life costs) are borne by us

  • goals of auctioned rights (Score:4, Informative)

    by G4from128k ( 686170 ) on Thursday April 08, 2004 @03:45PM (#8807323)
    The goal of the government in selling rights to pollute or log is more than just a matter of granting the right to do whatever the auction-winner wishes to do. The goal of the government, in part, is to encourage economic activity that creates jobs, exportable goods, and additional tax revenues. If someone buys the right to pollute, mine, or log, but does not use it, they are , at some level, not compensating the government and public for the full impact of their withholding of that resource from economic use.

    The implicit social contract is that the buyer will exercise these rights for an economic gain that benefits others too. Its analogous to the platform ecosystem business model -- you have a platform that others can create products around. You sell access to the platform but let entrants extract value too. The goal of the creating platform or in auction public resources is to enlarge the economic pie for all.

    One solution might be to limit the term of the right. Rather than granting in-perpetuity ownership to a pollution right or old-growth forest logging right, the term would be limited to some reasonable length of time. For instance, five years might be sufficient time to encourage peope to buy the right and make the needed invetsment to use the right. Every 5 years, that right would be reauctioned. This ensures that one group or company can't lock-in and inefficiently use these rights. If the former owner is not making money off the right they won't have money to buy the next 5 years worth. If another group has a better use, then they can take over for a better price.
    • Actually, I believe the permit program sells permits for 1 ton of emissions in a given year. Though you are allowed to "bank" emissions, such that if you emit less than your permits, you can roll that over into next year (to give incentives to people to start cleaning up earlier, and to reduce the pain of the transition between stage 1 and the significantly stricter stage 2 of the SO2 program. There are some nice graphs out there showing how the step function of the governmental program was nicely smoothe
  • I'm afraid that all that will happen from this will be the issuance of more polution credits. If activists buy x credits, the EPA could simply create x more credits to sell to businesses who want them. I haven't delved into the law that created this system. Is there a cap on how much can be auctioned off? Are businesses really having to shell out for scarcer pollution credits, or is this a way for the government to bring in extra funds?
  • I think I trust Krugman just a tad bit more than some free market zealot, thanks.

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