Energy

Capitalism is the answer to Global Warming  

A Cap and Trade gasoline permit system allows market mechanisms to guide the nation to less oil depdendency 

by Kevin Potvin  

There has never been a palatable way for the national government to get Canadians to use less gasoline. Hiking taxes is opposite to what Canadians clamour for when prices rise; rationing went out of style in WWII; inducements like public transit installations cost too much in both treasure and political capital; and legislation, like even-odd license plate days, grate too much.

Enter “Cap-and-Trade.” Cap and Trade systems impose restrictions on no one in particular, but rather impose an overall restriction on everyone combined, and leaves it to individuals to make their own choices in a free market environment.

For gasoline, a Cap and Trade system would first offer at auction permits to purchase 48 billion litres—the amount Canada now consumes in total each year. Each individual makes their own calculation about how many permits they need, and decides how much they are willing to spend.

Proceeds of the auction would be applied to gas taxes the government collects at the pump. This serves to keep both the government revenue neutral and all consumers, too, at first. Someone who needs to buy more gas than others because of where they live or for their work will obviously spend more at auction to buy permits, but because they normally buy more gas at the pumps, they benefit more from lower taxes.

Those who then over the course of the year make choices to use their car less, or who buy a more efficient car, will have extra permits to sell on the market. There will also be people who use more gasoline and will buy those extra permits. The price of extra permits will be freely determined by the market.

Later, the government can reduce Canada’s overall consumption by slowly lowering the number of permits offered at the annual auctions. Extra permits would become increasingly scarce under a shrinking cap, pushing their price up on the market and causing those who buy permits to reduce their demand, while allowing those who sell permits to make further changes and reap bigger profits.

It isn’t such a big leap of the imagination. We already toil under a capped system determined by global gasoline refining capacity, and we already adjust our daily usage according to rising and falling market conditions. All the Cap and Trade system adds is an opportunity to begin lowering overall national consumption in a more smoothly managed way instead of going down the same road in a bumpy, disruptive, and ultimately more expensive way, and to do so in a free market, instead of a legislated, environment.

The overall cumulative effect is a nation that uses less gasoline, and does so not by state repression or onerous taxation, but through free market mechanisms that naturally create individual consumer desire to reduce consumption and take advantage of opportunities to profit. The beauty of it is, everyone starts off neutral, including the government (which always remains neutral), and everyone is equally able to profit as much as they wish through personal innovation.

With a Cap and Trade gasoline system, gone are the earnest do-gooders who berate drivers about how bad and wasteful they are, something that only makes everyone hate the gasoline reduction message. Instead, everyone becomes a crafty self-interested capitalist looking for sneaky ways to reduce consumption and make tidy profits for doing so.