Will global warming policies make sweaters more expensive? "What?" you innocently ask. On Thursday, Bloomberg,com posted an article about New Zealand sheep farmers giving up sheep farming due to the government carbon credits program. The government carbon trading program, which began in 2008, pays the farmers more to plant trees than to grow sheep for wool and mutton.
The article reports:
"The nation's carbon-trading project was expanded in July to require energy producers to pay for their emissions. By 2015, the system will include agriculture, forcing farmers to pay for emissions their cows and sheep make through belching."
The article further points out:
"Even the government says the program will have little impact on global greenhouse gas emissions. New Zealand ranks 51st in greenhouse gas emissions with 0.2 percent of the global total, according to the United Nations."
It needs to be remembered that when the government subsidizes an activity, there will be more of it; when an activity is taxed, there will be less of it. This government program could have major implications for the mutton and wool supply in coming years. As we move to combat global warming (which may or may or not be man-made), we need to remember that the law of unintended consequences is a powerful thing.
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