President Obama gives a speech on energy security at Andrews Air Force Base on Wednesday. (image: nytimes.com)

In a speech delivered at Andrews Air Force Base in Maryland, President Obama announced that the Interior Department would lift bans on oil and natural gas drilling off the coast of the southeastern US and parts of Alaska. Along with the announcement, Obama made a clear effort to cast his decision as a middle road between unchecked drilling and a blanket ban on drilling expansion. Details of the policy reported on Wednesday by the New York Times support this characterization: vast areas of the Atlantic ocean, a section of the Gulf of Mexico, and select areas off the coast of Alaska will be opened, while waters along the entire Pacific US coast and other Alaskan coastal regions will remain off-limits.

In his speech, Obama referred to the compromise decision as a product of careful deliberation on America’s energy security and future energy resources. As such, he tied expanded drilling to an increase in renewable energy use, saying that both resource categories were required to meet US energy needs. “We have less than 2 percent of the world’s oil reserves. We consume more than 20 percent of the world’s oil,” he explained. “And that means drilling alone cannot come close to meeting our long-term energy needs.”

A White House press release offered a more general statement from the President on that subject:

I want to emphasize that this announcement is part of a broader strategy that will move us from an economy that runs on fossil fuels and foreign oil to one that relies on homegrown fuels and clean energy. And the only way this transition will succeed is if it strengthens our economy in the short term and the long term. To fail to recognize this reality would be a mistake.

As proof of this broad and balanced approach, Obama made two announcements on the energy efficiency of vehicles along with the allowance of expanded drilling. In just a few days, he said, the White House would unveil higher fuel efficiency standards for vehicles sold in the US that would amount to saving “1.8 billion barrels of oil.” In addition, the president announced that the federal government would “lead by example” and vastly expand its use of hybrid vehicles:

In order to save energy and taxpayer dollars, my administration—led by Secretary Chu at Energy, as well as Administrator Johnson at GSA—is doubling the number of hybrid vehicles in the federal fleet, even as we seek to reduce the number of cars and trucks used by our government overall.

The Navy’s energy security logo on the F18 fighter jet scheduled to be “the first plane ever to fly faster than the speed of sound on a fuel mix that is half biomass.” (image: navy.mil)

After he emphasized the “sensible” and middle-of-the road nature of the new energy policies, Obama drove home his view of why it is important. He touched on the issues of energy independence and efficiency in the context of national security. He lauded the US Armed Forces for their leadership in energy efficiency, citing huge investments in efficiency measures this year, and pointed to an Air Force F18 fighter jet parked behind him.

This navy fighter jet, appropriately called the Green Hornet, will be flown for the first time in just a few days, on Earth Day. If tests go as planned, it will be the first plane ever to fly faster than the speed of sound on a fuel mix that is half biomass.

As is expected in all major political statements in our current economic climate, Obama peppered his speech with references to energy initiatives creating jobs and growing the national economy. He began his remarks by congratulating his administration on making the “largest investment in clean energy in our nation’s history,” and said the investment was “expected to create or save more than 700,000 jobs across America.” He repeated previous statements that a robust green energy industry in the US is crucial to America’s economic recovery.

Finally, Obama used his administration’s moderate approach to the issue to urge Congress to act on energy reform. He closed his speech with a broad call to action:

I think that we can break out of the broken politics of the past when it comes to our energy policy. I know that we can come together to pass comprehensive energy and climate legislation that’s going to foster new energy—new industries, create millions of new jobs, protect our planet, and help us become more energy independent. That’s what we can do. That is what we must do. And I’m confident that is what we will do.

For American consumers, the new drilling policies will not change much, at least at first. The allowance of drilling in new areas does not mean drilling will begin in the next few years, if at all. According to analysis from the Times, “Much of the oil and gas may not be recoverable at current prices and may be prohibitively expensive even if oil prices spike as they did in the summer of 2008.” The new policy gives oil and natural gas companies the option of drilling in a wider swath of territory, but offers no incentives to begin drilling activity. The lower prices and increased domestic production claimed by drilling supporters, which have been contested by many sources, including the Department of Energy, would not be realized for at least five years, and probably more.

The stricter vehicle efficiency standards will deliver cost savings to American drivers by requiring them to buy less fuel. As Obama put it, “new standards…will reduce our dependence on oil while helping folks spend a little less at the pump.” However, these requirements will only apply to new vehicles and probably won’t go into effect for a few years, so it will only be the new car owners of tomorrow that will see the benefits of higher fuel efficiency mandates.

Expanding usage of high-efficiency heating oil systems not only achieves federal home energy conservation initatives; it also alleviates need for federal heating assistance, says the ICPA. (image: factoidz.com)

Last week, the New Britain Herald published quotes from Gene Guilford, president of the Independent Connecticut Petroleum Association, proposing that the heating oil-focused nonprofit known as the Connecticut Fuel Oil Conservation Board is optimally positioned to implement the green job and home efficiency improvement initiatives awaiting Congress approval. The article is a rewritten version of a press release posted on the ICPA website last Monday.

In the ICPA’s press release, Guilford emphasizes—with bold and underlined text—that oil heat conservation programs are not only a highly fruitful means of saving energy and creating jobs; they also reduce demand for federal heating oil assistance.

The oil heat industry is leading the nation with efforts to reduce energy consumption through energy conservation programs. For every $1 that is invested in energy conservation, taxpayers save $3 in government programs that help the neediest in our society pay their heating bills - we have the Green Collar jobs right here, right now.

The Connecticut Fuel Oil Conservation Board is a nonprofit founded in large part by the ICPA that promotes energy conservation by paying for the heating system upgrades of eligible low-income fuel oil users. Because high-efficiency burners are as much as twice as efficient as older burners, their installation alone can halve a user’s annual oil consumption and heating bill. Because installations require the expertise of contractors, they create jobs in the same manner as weatherization projects recently touted by President Obama. These facts alone make a compelling case for increased federal attention to the role of the heating oil industry in conservation efforts.

But reducing demand for heating oil assistance is an aim not often quoted in discussions about reducing energy consumption. It so happens that both LIHEAP (the federal heating assistance program) and the Conservation Board are directed at the same population segment, as Guilford pointed out in comments emailed to HeatingOil.com:

We created the Fuel Oil Conservation program specifically because the first body of consumers we targeted were low-income, LIHEAP recipients who typically have the least-efficient systems and least efficient homes. Increasing whole home envelope efficiency, including the heating system, reduces consumption and reduces the need for assistance.

According to Guilford, every one dollar of taxpayer money invested in boosting home energy efficiency saves three dollars in LIHEAP handouts. The 1:3 ratio comes from an assessment conducted by the Fuel Oil Conservation Board and the state’s human service nonprofit CAFCA (the Connecticut Association for Community Action). Working together, they determined the efficiency of homes receiving LIHEAP funding; the cost of converting older heating systems in those residencies to newer, highly efficient ones; and the reduction in heating oil demand that would result from these upgrades. He added; “The same basic ratio has been found true in the Connecticut Clean Energy Fund and other energy efficiency programs we deal with.”

This dollar-worth comparison of federal heating assistance support and fuel oil conservation programs requires careful thought. It’s true that lower-income families participating in equipment upgrades would reduce demand for heating assistance and ultimately save taxpayers’ money. However, in a scenario where the Connecticut Fuel Oil Conservation Board receives increased funding for efficiency programs, the funds would most likely come not from the federal government but from the state.

Guilford’s emphasis on reducing heating fuel consumption through conservation over helping those in need pay for the heating oil they’ve already burned makes a lot of sense, but we also need to be aware of a segment of the population not included in this discussion. People who don’t qualify for LIHEAP and still struggle to pay heating bills rely on assistance from state-level LIHEAP supplement programs like the Contingency Heating Assistance Program (CHAP) in Connecticut. If a state government were to re-allocate funds for these supplemental programs to conservation efforts, some families might be left without the help they need.

According to Energy Star and the US Department of Energy, nearly half of the average American home’s energy use goes towards heating and cooling. Zooming out, the Institute for Market Transformation found that a whopping 40 percent of the nation’s total energy consumption comes from buildings. These stats are what have made home energy efficiency a key component of last year’s stimulus package and weatherization the centerpiece of President Obama’s latest job-creation proposal, the HomeStar program (also known as “Cash for Caulkers,” and currently awaiting inclusion in a congressional jobs bill).

Federal energy saving programs tend to emphasize big expensive measures to save energy, but more focused and simple processes of simply conserving fuel usage in the first place is, as the ICPA’s press release shows us, a more effective use of taxpayer money.

Pictured, Obama discussing weatherization at a Home Depot in Virginia in December. Today Obama will announce a revised version of his energy rebate program.

President Obama will revive his plan to boost employment, reduce energy costs, and cut emissions by offering rebates to homeowners for energy-efficiency improvements in his visit to Savannah, GA on Tuesday, reports Politico. The Home Star program, also known as “cash for caulkers” despite the objections of one of the program’s creators, was left out of a House jobs bill in December. The administration hopes that Congress will include the program in a future job creation bill.

The $6 billion proposal would offer homeowners up to $3,000 in rebates for energy-efficiency renovations. Consumers would receive the rebates immediately, and the government would then reimburse businesses’ rebate payouts. The program would operate for a limited time, but the administration expects that up to 3 million households would take advantage of the rebates.

By creating the incentive for homeowners to make upgrades or renovations, Obama hopes to boost employment among construction workers, contractors, and companies that make insulation and other materials that would be covered by the rebates. Energy-efficiency upgrades would also save homeowners money on energy costs, which would give households more money to spend for years to come—something Obama memorably called “sexy.” Although the program is being pitched as a vehicle to create jobs and save on energy bills, there are environmental benefits, as well; by consuming less energy, efficient homes produce fewer carbon emissions.

There are two tiers to the Home Star program: Silver Star rebates and Gold Star rebates. Silver Star rebates cover 50 percent of the cost of a number of straightforward upgrades, including insulation, duct sealing, HVAC units (such as boilers and furnaces), windows, and doors. Each Silver Star rebate would be good for $1,000-$1,500, and each home would be eligible to receive multiple rebates up to a total value of $3,000.

Gold Star rebates would be offered for more comprehensive retrofits that would achieve a 20 percent reduction in energy costs, as determined by a home energy audit. Gold Star rebates would be in the amount of $3,000, and consumers could receive more rebates for improvements that gain more than a 20 percent reduction in energy costs.

Obama’s latest version of the Home Star program reduces the total amount of rebates available to each home. When announced in December, the program offered homeowners up to $12,000 in rebates, with rebates covering 50 percent of the costs of home improvements.

Perhaps the reduced version of the program will help it win congressional approval. As with Obama’s proposal last December, the revised Home Star program requires congressional action before homeowners can receive any rebates to make their homes more efficient and save money on energy bills.

Support for domestic oil drilling and nuclear energy expansion was a point of common ground in the President's address and the Republican response. (image: cbc.ca)

In his State of the Union speech on Wednesday, President Obama urged the U.S. Senate to pass comprehensive energy and climate legislation, and turned away from any discussion of cap and trade or putting a price on carbon to focus on job creation and energy independence. Such legislation can put Americans work today, “building the infrastructure of tomorrow,” said Obama.

Framing clean technology in terms of national competitiveness, Obama went on to say that “There’s no reason Europe or China should have…the new factories that manufacture clean energy products.” Building the facilities to create clean energy and offering homeowners rebates for making their homes more energy efficient will create those jobs in the US.

China and India, Obama said, are “putting more emphasis on math and science,” and investing in clean energy, “because they want those jobs.

“No area is more ripe for innovation than energy,” said Obama. However, when he named the types of energy that would drive job production, he did not include many of the renewable sources of energy that the environmental movement considers central to the future of US energy. Instead of wind and solar, Obama called for expanded nuclear power, offshore oil and gas development, advanced biofuels, and clean coal technology. Focusing on these sectors of the energy industry represents the Democrats’ compromise position, since they have already tried to entice Republican support for the climate and energy bill by offering concessions for offshore drilling and nuclear energy.

Mention of advanced biofuels holds special relevance for the heating oil industry and heating oil consumers. Biofuels may represent the future of the heating oil industry, and industry pioneers such as Hart Petroleum are leading the way to the development of cleaner heating fuels. The Department of Energy has already awarded a great deal of money to biofuels research, and Obama’s inclusion of biofuels in his State of the Union address indicates that such favorable funding is likely to continue.

Ensuring that innovation in energy moves forward “means passing a comprehensive energy and climate bill with incentives that will finally make clean energy the profitable kind of energy in America,” said Obama. He also expressed gratitude to the House of Representatives for passing the Waxman-Markey bill in June of last year, which included provisions for cap and trade, and urged a bipartisan effort (such as that led by Senators Kerry, Graham, and Lieberman) in the Senate this year to do the same.

Incentives for energy efficiency and clean energy are the right thing to do for America’s future, Obama said, because “the nation that leads the clean energy economy will be the nation that leads the global economy. And America must be that nation.”

In an effort to reduce the deficit, Obama stated that tax cuts for oil companies will be discontinued, which could lead to increased costs that will be passed on to heating oil consumers.

As an indication of how President Obama’s proposals on energy aimed to find common ground, Republicans seemed to agree that innovation and clean energy have key roles to play in America’s economic future. In the Republican response to Obama’s speech, Virginia Gov. Bob McDonnell said that all Americans can agree that the country must become more energy independent.

“We are blessed here in America with vast natural resources and we must use them all,” said McDonnell. He went on to say that technological advances can “unleash” alternative energy sources such as wind, solar, and nuclear power, which can lower energy costs.

However, McDonnell said, the Obama administration’s policies delay offshore production and hinder the expansion of nuclear energy. The Obama administration and congressional Democrats also want to impose what McDonnell called “job-killing” energy taxes in the form of cap and trade—objections that Obama had hoped to steer clear of by avoiding any mention of cap and trade.

Members of both parties can certainly agree with McDonnell that, “Now is the time to adopt energy policies that create jobs and lower energy prices.”

The Recovery Act devoted $5 billion to the Weatherization Assistance Program. (image: fws.gov)

Despite the frigid temperatures of the past month, a federal program designed to help kick-start the economy with incentives for home weatherization has seen few takers thus far. CNN Money reported yesterday that the Energy Department’s Weatherization Assistance Program has only spent $441 million out of a $5 billion windfall it received in stimulus funds. Still, the $441 million already spent is still more than double the program’s previous annual budget of $200 million. Said Rose Jackson, housing and weatherization director for a San Antonio-area agency: “Can we spend the money, is there a need? Oh yeah.”

CNN indicates a number of factors that might be responsible for the program’s slow start, chief among them bureaucratic red tape. Contractors on the program are required to be paid the prevailing local wage for their work; this was not the case before, and the new requirement means that project managers must oversee payments to ensure that taxpayer dollars are being spent correctly. In addition, department staff and contractors in each state had to be trained in the requirements of the program. For Jackson’s agency, training was delayed because funds didn’t arrive until the summer, though she says that the program in her area is now ready to roll. At the state level, Texas’s program was recently taken to task for only having completed weatherization on seven homes by the end of December, but there are now at least 2,149 in progress.

Matt Rogers, senior advisor for Recovery Act implementation at the DOE, estimates that nationally 20,000 to 25,000 homes are being weatherized each month, a considerable increase from 8,000 a month before the addition of stimulus funds. Whatever remains unspent from the $5 billion goes back into the government piggy bank by 2012. By that time Rogers hopes to have weatherized some 600,000 to 700,000 homes by then.

National Weatherization Day Message from Senior Advisor Matt Rogers from U.S. Department of Energy on Vimeo.

Of course, the weatherization program doesn’t merely provide employment for contractors and incentives for homeowners; weatherizing buildings on a scale this large will help to take a considerable amount of demand off of the national energy grid. In November, we reported an estimate that the new program could ultimately save the US as much as $3.5 billion per year in energy costs, or 500 million barrels of oil.

While certainly every home that reduces its drain on the grid helps, the Weatherization Assistance Program is not the Energy Department’s only effort to improve energy efficiency. In Boston, a separate DOE funded-program called “Retrofit Ramp-Ups” is taking that logic to the next level by planning to implement upgrades at the neighborhood level. Boston’s historic Blue Hill Avenue is the proposed site for a project that would prove that it’s possible to upgrade older, inefficient buildings and that there are added benefits to addressing not just homes, but apartment buildings and commercial space as well. Boston officials expect that the program would contribute 4,700 “green” jobs and, in as little as three years, save $41 million in annual energy bills.

The potential economic cost of a cap and trade system in the US has drawn heavy criticism. (image: southcarolina1670.files.wordpress.com)

Since everything costs money, there is an economic dimension to every policy decision.

The proposed implementation of a cap and trade policy in the US aimed at reducing greenhouse gas emissions is no exception. The idea behind it is that the amount of carbon any given emitter—such as a power plant—can give off is capped or limited. To emit more than that, additional emissions allowances must be purchased, which, of course, costs money. Therefore, cap and trade is, at its heart, a tax on carbon—it makes it more expensive to emit. And since carbon emissions are a by-product of all combustion, it’s really a tax on burning fuel: coal, natural gas, and oil. In trying to restrict or reduce carbon emissions, the government increases the cost of generating power, providing heat, and many other industrial activities. Cap and trade is therefore as much economic regulation as environmental.

As economic regulation, it may be disastrous. There are a number of different problems with or challenges to it as economic policy. This is not to say that it is or should be a non-starter—the benefits may outweigh the cost. But any honest discussion of cap and trade MUST include the economic costs of the policy, which can be roughly organized into the following issues:

1) Cap and trade will cost the average American. Lest you think that this concern is just propaganda from Obama administration enemies, the administration itself has admitted that the costs of cap and trade will trickle down to American families. For example, in September 2009, a Treasury Department study found that the cost to taxpayers would be between $100 billion and $200 billion per year, equivalent to a 15 percent income tax hike. That study was based on one particular methodology—assuming that all allowances are auctioned by the government (rather than given away for free) and converting the resulting income into its equivalent in tax receipts. Other methodologies find other costs, ranging from, from example, a MIT study cited by cap and trade advocates that puts the cost at $800 per family per year, to the $3,100 per family per year quoted by House Republican John Boehner.

In fairness, nobody knows for sure what the additional cost will be—not only is there little precedent to look to, but many details remain up in the air. But given that even cap and trade supporters find an annual average cost of several hundred dollars per year, it’s simply not reasonable to posit carbon reduction without cost. (And not logical, either—does anyone really think that businesses paying more for carbon will absorb that cost without passing it on to consumers?)

2) Can we afford it in a recession? Unemployment remains high, underemployment even higher, and, stock market gains notwithstanding, a prodigious amount of personal and corporate wealth has been wiped out. Is this the time to increase costs? Shortly, there will be a chance to see what Californians think: a state assemblyman is trying to put a ballot initiative before voters that would suspended the state’s own cap and trade scheme (passed in 2006; to become effective in 2012) until a time when state unemployment, currently at 12.3 percent, falls below 5.5 percent. What seemed supportable when the economy was growing and unemployment barely touched 5 percent seems dangerous when 1 in 8 are out of a job. The problem is not only the additional cost to cash-strapped taxpayers—a study commissioned for the California Small Business Roundtable pegged the cost of California’s cap and trade scheme at up to $3,857 per household—but also the potential to drive business and much-needed jobs away.

3) Anything other than universal cap and trade will encourage outsourcing economic activity to polluters. The problem is that in our global age, there’s always a race to the bottom—businesses will relocate, or at least outsource production and services, to the least expensive place they can. That’s why toys are made in China and IT call centers are in India. One of California’s concerns about their own cap and trade scheme is it might drive energy-intensive industries across state borders, to Texas to Nevada, where there are no such limitations on carbon emissions.

Or cap and trade might drive industry overseas, to places like China and India. The developing world has been resisting the same hard limits on emissions that they want the developed world to embrace. If it’s cheaper to emit carbon in China or India, it’s also cheaper to manufacture there; when you stack that advantage with the advantage of low wages, it’s easy to imagine a cap and trade regime that’s not universally applied throughout the world driving business to countries that have not accepted emissions limits.

Worse, those countries are generally the “dirtiest” on a per capita basis. They have lower-tech, less efficient infrastructures on average, as well as markedly less environmental, health, and worker safety regulation of all types. Shifting industry to the developing world results in more pollution than keeping it in the developed world, which means that anything less than completely universal cap and trade may end up increasing carbon emissions.

4) Under cap and trade, trade in carbon allowances may turn in the next big financial bubble. A study by a respected, pro-environment nongovernmental organization, Friends of the Earth International, says that the world’s largest functioning cap and trade market may create the next apocalyptic financial meltdown. That’s the European Union’s carbon market, in which a cap and trade scheme has been operating for several years. The problem is, in the words of FoE: “The majority of the [carbon allowance] trade is carried out not between polluting industries and factories covered by carbon trading schemes, but by banks and investors who profit from speculation on the carbon markets—packaging carbon credits into increasingly complex financial products similar to the ‘shadow finance’ around sub-prime mortgages which triggered the recent economic crash.”

That shouldn’t be surprising: Wall Street and its global counterparts have shown they will speculate in any and everything in which they can make a buck. That’s Wall Street’s purpose and its reason for existence; it’s no more exceptional or unusual for Wall Street to speculate than it is for scorpion to sting. That means if cap and trade is implemented, special care must be taken to prevent financial players from jumping in, dominating, and distorting the market, with potentially disastrous results.

Beyond Europe, actual experience with carbon trading is limited. U.S. cap and trade legislation, for example, has not yet passed Congress. However, some states are not waiting on federal legislation. Instead, they’re looking to form their own or regional cap and trade markets—in particular, a number of Northeastern states have already formed a functioning cap and trade marketplace. That may provide the chance to accrue experience with cap and trade on a manageable scale, though as per California’s concern, it does create that potential for a race to the bottom.

The largest functioning U.S. cap and trade market is the Regional Greenhouse Gas Initiative centered around New York. First mapped out in 2003, it’s had some success, though more in terms of raising revenue so far than in reducing carbon. This revenue can be applied for good, public purposes; the money raised by RRGI in New York is used to fund a Green Jobs/Green New York Act which pays for energy-saving projects.

That’s also a feature of the California plan currently under attack—carbon allowances will be sold to businesses, allowing the government to pocket the revenue and return it to its citizens. However, that’s not a feature of all cap and trade plans, which leads to the fifth cap and trade economic issue:

5) Qui bono, or who benefits? The cap and trade legislation working through Congress calls for giving away a large number of carbon allowances to certain industries. The industries (like utilities or steel manufacturers) that get free allowances will reap large benefits compared to industries (like oil or food packaging) that have to pay for their initial allocation. Moreover, giving away any substantial number of allowances will result in a net transfer of wealth from the country at large to the recipients of the free allowances. In both cases, these transfers come about because the holders of free licenses can sell them to other businesses, which then pass the cost along to consumers.

This was found in Europe’s experience, where “an allocation approach that gives all allowances for free to directly affected industries will have the overall effect of transferring some wealth from the broad public (in this case consumers) to those industries.” Thus, any scheme or mechanism for allocating carbon allowances that plays favorites will create economic winners and losers.

Of course, if you don’t give allowances away—if you monetize completely the right to emit carbon by selling all allowances (at auction or otherwise), you still need to contend with a sixth economic cap and trade issue:

6) Money from cap and trade is difficult to account for and may be easily diverted. Any time an enormous new pool of money is created, there’s an equally enormous temptation for fraud, corruption, and gerrymandering. For example, half of New York’s Green Jobs/Green New York funds were diverted away from their intended use to the general state budget, going the way of such other diverted funds as pension plan or unemployment fund contributions. In Europe, $7.4 billion of tax revenue was lost in a just a year-and-half from cap and trade fraud.

As discussed above, if you don’t capture the benefit of selling carbon allowances for the state, private parties may instead snatch up the benefit. But if you do try to capture it, you leave it open to the same problems that beset every large, new, public revenue source. Is it possibly the case that any cap and trade plan simply too large, with too much money at stake, to be run fairly and efficiently? At a time of spiraling budget deficits and soaring spending, do we really want to take billions more out of the private sector and put it into government hands? But if not, what’s the alternative—do we let a relative handful of private parties monetize a public resource for their own benefit?

There is no simple right answer. The point, though, is that cap and trade is arguably more complex on the economic side than on the environmental or scientific side. It’s therefore vital to consider the economic issues as carefully as ecological ones. It’s even worth considering, as suggested by the Director of the University of California Energy Institute, whether cap and trade is even the right way to reduce carbon.

That gentleman, Dr. Severin Borenstein, contends that it’s almost impossible to set the cost of emitting carbon just right—too low, and you don’t affect meaningful reductions in emissions; too high, and you risk substantial economic harm. That’s why he advocates technological fixes—investing heavily in new energy sources and greater energy efficiency—as a better solution than taxing carbon.

Borenstein might be right. He might be wrong. But given the manifest complexities of cap and trade, it’s a point worth considering. After all, at this point a substantial portion of not just U.S. policymakers but world leaders have been spending a great deal of time and effort on designing a cap and trade plan for more than a year, with little to show for it. It’s possible that this shows that setting up a fair and workable cap and trade system is a problem without a solution.