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Dear Mr. Obama


 

In one of his election promises, Obama said he would implement a cap-and-trade policy on emissions. This can be an efficient way of cutting carbon, but it can also lead to real problems, depending on the details of how it is done. If Obama is really going to implement a cap and trade policy, he should learn from Europe’s mistakes.

In brief, Europe issued 170 million credits too many. Energy companies noticed they had millions of tonnes of carbon dioxide credits they didn’t need. They sold their unused licenses on, making millions of dollars in profits.

Who did they make the money from? Universities and hospitals and other institutions who bought the credits because they weren’t allocated enough. As soon as the energy companies sold the credits, the price collapsed, and non-profits were left holding a bunch of overpriced shares of the atmosphere. Non-profits, like the University of Manchester, who paid $172,500 for their carbon rights, ended up subsidizing companies like BP and Shell. Unfortunately, none of this helped the environment and carbon emissions actually increased. All-in-all, a huge goof, and hopefully, a mistake Obama will learn from.


 

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