Saturday, May 23, 2009

Cap and Trade= Carbon Tax + Corporate Welfare part 1 million and five

I have previously stated my preference for a carbon tax over a cap and trade regimen. What I see as the weakness of a Cap and Trade program proponents see as its strength: its opaque nature. It is true that a cap and trade, were the emissions permits to be auctioned off, would simulate a carbon tax. All well and good. But the reason most cap and trade advocates prefer a cap and trade is not because it simulates a carbon tax, but that it does so and reformers can avoid saying the word tax. But as its opacity is a double edged sword, it is also much more susceptible to rent seeking as is evidenced in the form of the proposed Waxmen-Markey bill whereby 85% of the emissions permits would be allocated as opposed to auctioned off. I can imagine how rigorous the allocation methodology will be: 1. Do you pollute extensively? Check; 2. Are you headquartered in or provide service extensively in a key congressional district? Check; 3. Have you donated to my (insert namer or party) campaign? Check; 4. Here is a free emissions permit which you can now use to defray the costs of your pollution by either keeping or selling at a premium to a less politically connected power company.

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