I'm sure we've heard it all: Global-level mass-extinction, famine, war, disease, natural disasters, basically an apocalypse waiting for us if we don't reduce carbon emissions to halt global warming (climate change), and it's coming sooner rather than later.
However, it appears the political leaders of the world (the whole world) believe that global warming is a problem that the first-world countries can simply throw money at and it will go away. Cap and Trade is one such philosophy. From Wikipedia:
A central authority (usually a governmental body) allocates or sells a limited number of permits to discharge specific quantities of a specific pollutant per time period. Polluters are required to hold permits in amount equal to their emissions. Polluters that want to increase their emissions must buy permits from others willing to sell them. Financial derivatives of permits can also be traded on secondary markets.
The "cap" part of "cap and trade" makes sense: if we want to reduce emissions, then we should limit how much emissions we can tolerate to reduce global warming. It's the "trade" part that bothers me. My particular concern is as such:
Firstly, let us assume that countries pollute at vastly different levels. This could be caused by any number of things, including but not restricted to:
Land mass: A larger country can hold more factories, and therefore produce more emissions.
Economy size: A country with a larger/more prosperous economy has more people employed (in raw numbers) and some of those people are involved in professions which increase pollution.
Stage of development: Poorer countries may not have the technology required to build greener technologies, or the expertise to use green technologies which already exist.
Economy type: Economies built based on e.g. manufacturing will pollute more than economies built on e.g. tourism.
And so on. However, my understanding is that carbon credits are distributed to countries irrespective of these factors. To apply a bit of game theory, there appears to be two solutions to this conundrum (in which this is a sliding scale, not a dichotomy):
Pollute less. This could include things such as increasing education/R&D to develop greener technologies, or simply shutting down businesses which pollute too much.
Buy carbon credits from other countries who pollute less.
Since option 1 might be very politically inexpedient (telling a large manufacturer to shut down 20 plants is probably not going to fare well next election cycle), option 2 is the most expedient. In which case, it seems to me, the result of cap and trade is simply a money-funneling operation from countries which rely highly on high-emission industries to countries which do not, without meaningfully impacting actual greenhouse gas emissions.
Now, my questions are as follows:
If we believe global warming to be a global extinction level event, why do we allow the "trade" part at all? Why not simply "cap"? If you are a country who misses your targets, you get sanctioned, e.g. by international tariffs of countries refusing to buy products produced by inefficient manufacturing, etc., until you get your emissions down.
If we allow the "trade" part of "cap and trade", why do we not simply allocate emissions targets using a method more realistic to the states of various economies? E.g. If the USA gets 50 carbon credits and uses 70, and Norway gets 50 credits and uses 20, why not instead allocate 75 credits to the USA (allowing them to use their 70 credits with 5 left over) and Norway gets 25 (allowing them their 20 credits with 5 left over)? Why is a transfer of money necessary for this scheme to be effective?