Unintended consequences are always part of any new scheme, and emissions trading is no exception. The European model ought to provide plenty of cautionary examples. Free market advocates claim emissions trading is preferable to outright taxation, but ignore the fact that in both cases, a huge and mostly arbitrary transfer of wealth is occurring. Emissions trading increases the prices to consumers just as much as taxes do, and if anything, result in less targeted application of the proceeds.
It may be a good idea to artificially raise the price of energy. Doing this stimulates investment in new sources of energy, thereby helping nations to achieve greater measures of energy independence. But where will all of this capital go? In the European model, much of the proceeds has been used to artificially create a market for biofuel, which in-turn has caused the most devastating rounds of tropical deforestation in history. While environmentalists continue to look the other way, the final destruction of rainforests in Asia and Africa rages unchecked, to clear land for biofuel plantations. It is a catastrophe.
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