The Regional Greenhouse Gas Initiative: What Went Right

Regulations kill business.

This view, simplistic as it is, has come to dominate the national conversation on environmental policy. Sometimes the regulations work. Take the Regional Greenhouse Gas Initiative, which Massachusetts entered into with nine other states. The idea was a regional variant on the never-popular idea of cap and trade. Briefly in 2005, the member states set a limit on the amount of carbon dioxide that companies could emit starting in 2009, sold emission shares to the different companies — which raised $1.3 billion, by the way — and then allowed the companies to swap emission permits with each other so as to remain within their target discharge and avoid overage fines.

But rather than set off a wave of hang-wringing unemployment, the regulations were too weak. Companies didn’t discharge anywhere near the 188 million tons per year that regulators expected, according to a report in the Globe. That comes to 564 million tons for three years. Instead, the total three-year output was 388 tons. The minor story is that Massachusetts pulled 16.8 million unsold discharge allowances to up the demand, but that’s the minor story.

The major story is: OMG, so this is how capitalism regulates itself. Here’s how the Globe framed it:

However, by the time the program went into effect in 2009 emissions across the participating New England and mid-Atlantic states had dropped significantly due to weather, investments in energy efficiency and renewable energy sources and the availability of cheaper, cleaner gas.

Sometimes environmental friendliness (or, OK, at least a lack of outright hostility) isn’t an automatic job killer. Sometimes the industries kill the jobs for other reasons (that’s what they mean by efficiency). What we’re basically learning here is that environmentalists can trust business to not just pollute willy nilly. Business do what they do for a reason, and that reason never changes: profit! And businesses can cut down on emissions, which can actually help them save money (and thus, make more profit). At the same time, regulations don’t automatically snuff industries and kill jobs. It’s estimated that these regulations created 3,800 jobs in Massachusetts alone.

Of course, businesses did purchase and stockpile 40 million allowances for future polluting, but that’s part of the game. Likewise, regulations, when they are ineffective, do look like classic unnecessary government overreach — what’s the point of paying regulators to do something businesses would have done anyway? So we’re reinforcing and breaking our stereotypes all the same time. Hey, no one’s perfect.