Copenhagen Update: Clinton Pledges Away Cap-and-Trade Revenues

Written by E. Calvin Beisner, Ph.D.

Thursday, 17 December 2009 19:00

Forget about a revenue-neutral cap-and-trade bill if Clinton's pledge takes effect.

U.S. Secretary of State Hillary Rodham Clinton told a packed news conference at the UN climate summit today that the United States would take the lead in raising $100 billion a year to help developing nations meet climate change treaty obligations and adapt to future climate change, on condition that those countries--especially China, India, and Brazil, three large and exceptionally fast-growing economies--submitted to strict transparency and accountability regarding their own carbon emission reduction efforts.

Those nations have resisted doing that, because they doubt the United States' sincerity in living up to the Obama administration's pledges of emissions cuts of our own.

Part of Clinton's statement should be of considerable concern to Americans watching the evolution of proposed cap-and-trade legislation in Congress. One thing proponents have generally said to make the idea palatable was that they would try to make it revenue neutral. That is, they would cut taxes on other things to make up for revenues (taxes by another name) generated by selling carbon emission permits. If you believed they'd achieve that, you're a lot like Charlie Brown believing Lucy wouldn't pull the football away the next time she held it for him to kick.

Well, Clinton's statement here in Copenhagen should put all doubts to rest. Cap and trade, if it passes, will most certainly not be neutral. How do we know? Because Clinton said in her press conference that one source of the $100 billion annual wealth transfer to developing nations would be the revenues from auctioning carbon emission permits under a potential cap-and-trade regime.

Over the last 50 years the wealthy countries of the West have given over $50 trillion--that's right, trillion--in aid to poor countries in Latin America, Asia, and, especially, Africa. And, as William Easterly demonstrates from official statistics in The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good, there is actually a negative correlation between aid received and economic progress.

Official development aid (ODA) slows progress, for a variety of reasons. Two of the most important are that it props up corrupt regimes and perpetuates a sense of helplessness in the people. The vast majority of official development aid never reaches the poor in these countries. It gets consumed by bureaucrats and, all too often, by the those who masquerade as heads of state. Much of it winds up in their Swiss bank accounts--ready to provide them a cushy golden parachute should some other thug manage to push them out of power.

This is why Harvard- and Oxford-educated Zambian economist and World Bank consultant Dambisa Moyo argues in Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa that all ODA should end--completely. Indeed, even much private, philanthropic aid is destructive--even, sadly enough, when it's given by religious organizations, directly to the poor rather than to governments, a case made well by Brian Fikkert and Steve Corbett in When Helping Hurts: Alleviating Poverty Without Hurting the Poor . . . and Ourselves. . . .

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