Is the threat of speculation a reason to shun cap and trade?

Any time you have a market, there’s some opportunity for speculation. Even if the good being traded isn’t storable, there may be a futures market, so you can bet on the future price.

For example, the fact that wheat is traded means that there’s also a wheat futures market; and because wheat can be stored, futures prices affect spot prices.
So, should fear of speculation lead us to ban trading in wheat?

Now substitute “emission permits” for wheat. It’s exactly the same story.


The best defense of the use of market forces to control pollution comes from who else but Paul Krugman.

By Stable Genius

I am the very model of a Stable Genius Liberal.