A key provision of the Kyoto Protocol is a cap-and-trade system. Some, however, doubt whether such a system could be implemented on a worldwide basis. David Victor, a professor at Stanford University, argues: "Trading of carbon permits across borders rests on international law, which is a weak force. Nations can withdraw if their allocation proves inconvenient, and there are few strong penalties available under international law that can keep them from defecting. Yet the integrity of an emission trading system requires the impossible: that major players not withdraw."10 Regulating emissions on a global scale also would require developing countries to create political institutions that currently do not exist.
Furthermore, it is too easy for dishonest emitters to cheat under a cap-and-trade system. Ross Gelbspan argues: "[International carbon trading turned out to be a shell game. Carbon is burned in far too many places—vehicles, factories, homes, fields—to effectively track even if there were an international monitoring system. Trading also became a huge source of contention between industrial and developing countries."11 Officials at the United Nations recently expressed concern that unscrupulous investors have been receiving Kyoto credits, which they can resell, for their funding of projects that actually do little to reduce emissions. Some Kyoto critics believe that business owners in developing countries have deliberately stepped up their emissions in the hope that investors will pay them to emit less and in the process earn Kyoto credits that can be resold to others. Incidents such as these could undermine confidence in the entire system.
Kyoto, like other regulatory schemes, could be exploited by special interests. Enron Corporation, the notorious energy-trading company that went bankrupt in 2002, was one business that stood to gain from the treaty's adoption. Christopher Horner quoted from a memo written by a lobbyist who called Kyoto "precisely what [Enron was] lobbying for" and predicted that "his treaty will be good for Enron stock!"12 Some also believe that a cap-and-trade system will reward emitters because the value of the allowances given to them would be larger than the costs of reducing their emissions.
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