The threat of corruption is a widely recognized downside of enacting cap-and-trade legislation, which was passed by the U.S. House and currently is being considered in the U.S. Senate. Soft corruption is inevitable under cap-and-trade, but instead of money being exchanged under the table, however, the government doles out carbon emission allowances worth billions of dollars to favored political constituents.

If implemented, cap and trade will result in companies spending more effort currying favor from government officials rather than innovating and meeting their fiduciary responsibility to their stockholders or trying to come up with innovative technology to help their customers. The end result is crony capitalism instead of the free markets that have been a mainstay of American prosperity. Yet, as bad as soft corruption may be with cap-and-trade, it appears things could get far worse.

The Telegraph reports that fraud in the European Union carbon-trade market may have accounted for up to 90 percent of all market activity, resulting in criminal profits in the billions. Apparently scammers employ something called "missing trader" techniques, whereby traders buy up credits in European countries with a lower value added tax and sell them in the U.K. by charging the domestic rate and pocketing the difference. Seven arrests have already been made already with more likely to come.

No matter what one's view is on global warming, cap-and-trade is bad policy for America. The last thing we need is new government schemes that provide opportunities for corruption either hard or soft.