(February 16, 2011) In a February 14th National Post article, author Dan Gardner argued that ‘command and control’ environmental regulations should be replaced with a cap and trade system.  But as Probe International Executive Director Patricia Adams points out, cap and trade is just another variant of the ‘command and control’ approach that Mr. Gardner claims to oppose. Below is her response in today’s National Post.

Dan Gardner rails against the Tories for using command and control regulation to reduce Canada’s CO2 emissions. Better, he says, to create a cap-and-trade system in which total emissions are capped and emission permits are traded. That would be a “persuasive” and “efficient” way to reduce emissions. “Anyone with the slightest understanding of markets knows this,” he states.

But it is Mr. Gardner who doesn’t understand markets. Unlike a real market where the commodity traded has inherent value, CO2 has none. The parties involved in trading carbon permits have no interest in the CO2 per se; the value lies in the permit. If no CO2 is actually offset, neither buyer nor seller would suffer a loss and the essential self-regulating nature of a market — in which sellers and buyers discipline each other to trade a product with real value — is missing. Because this faux market created many mechanisms for misrepresentation, fraudsters have invaded it, the buyers and sellers exploiting their mutual interest in collusion and kickbacks.

Mr. Gardner is correct to disapprove of command and control regulation of Canada’s CO2 emissions in which “some bureaucrat in Ottawa” decides who will produce how much. But he should recognize that a government-mandated market of a commodity without inherent value is no market at all. It is just another form of command and control regulation, and one that provides rich pickings for crooks.
Patricia Adams, Executive Director, Probe International, Toronto.