Global Warmers and Stupidity Credits

By Craig Steiner
Thursday, August 09, 2012

I've never met a politician that is smarter than the free market.

Or a scientist.

Or an economist.

The problem with elitist "management" of "free" markets is the inevitable unintended consequences. Sometimes those consequences are accurately predicted by conservatives. Other times it takes turning the government micro-management loose on the free market to see what happens.

“They quickly figured out that they could earn one carbon credit by eliminating one ton of carbon dioxide, but could earn more than 11,000 credits by simply destroying a ton of an obscure waste gas normally released in the manufacturing of a widely used coolant gas. That is because that byproduct has a huge global warming effect. The credits could be sold on international markets, earning tens of millions of dollars a year...

So since 2005 the 19 plants receiving the waste gas payments have profited handsomely from an unlikely business: churning out more harmful coolant gas so they can be paid to destroy its waste byproduct. The high output keeps the prices of the coolant gas irresistibly low, discouraging air-conditioning companies from switching to less-damaging alternative gases. That means, critics say, that United Nations subsidies intended to improve the environment are instead creating their own damage.” (MSNBC)

So while the whole concept of carbon credits was to reduce gases related to alleged global warming, this perverse system has actually created an incentive to create more of those gases.

This would be a good time for conservative critics of carbon credits to say "We told you so."

We told you so.

The whole concept of carbon credits is the worst of both worlds. Not only is the government interfering in the free market, it's trying to create a market out of thin air by forcing people to want something they really have no use for (carbon credits).

But--as mentioned above--the free market is smarter than any politician, government, scientist or economist. The free market will look for a way to profit, and it will always out-smart the politicians and their regulations.

So here we have an example where an industry creates two gases regulated by carbon credits. And it just so happens that by creating more of one, it can create and destroy more of the other--resulting in the accumulation of artificial, yet lucrative, carbon credits.

To those who would quickly suggest "fixing" the regulations to eliminate this loophole, good luck. The combination of global warming gases produced by this process is unique to this process. Any of the other unknown number of industries that generate controlled gases will produce them in other combinations, or perhaps the same gases in different proportions.

There's truly no way to architect a carbon credit scheme that will accomplish the stated environmental goal.

This should come as no surprise. Carbon credits were marketed as "regulation light" or even a "free market" solution. They're neither. They're hard-fisted government regulation with all the downsides and costs involved in any other regulation. And given artificially imposed regulations, the free market has done what it does best: It has figured out how to profit, and the politicians have actually created an incentive to make matters worse.

This should serve as yet another crystal clear example of the dangers of government regulation and market manipulation.

Even supposedly good-intentioned regulations can produce results precisely opposite of what was desired. Encouraging home ownership led to a housing bubble and crash. Interfering in the higher education market has led to higher tuition and a student loan bubble. Artificially low interest rates has led to the stock market ballooning and crashing. And trying to manipulate the market to reduce certain gases has actually result in their increase. One shudders to think of the eventual outcome of government interference in the health care industry.

Politicians tinker with the free market at our own risk because politicians aren't as smart as they think they are. The free market is much smarter every time. In this case, the air conditioning industry just outsmarted the entire worldwide global warming industry.

And, in fact, the air conditioning industry is currently profiting from the arrogance and stupidity of the global warming industry.

Now if I could just convince the government to create a stupidity credit market from which I could skim a commission on each transaction, I'd be all set.