The Economist, no conservative bastion, looks at the cap and trade bill now up for a vote in the House committee chaired by Henry Waxman. Like the stimulus package, President Obama outsourced the crafting of the bill to the leaders in the House and they came up with a doozy of a bill that gives away benefits to favored industries and defeats the whole theory behind the cap and trade principle.
President Barack Obama has long argued that America should join Europe in regulating planet-cooking carbon. But he has left the details to Congress. And the negotiations to craft a bill that might actually pass have not been pretty. The most straightforward and efficient approach to reducing carbon emissions—a carbon tax—was never seriously considered. Voters do not like to hear the word “tax” unless it is followed by the word “cut”.
So Mr Obama proposed something very similar to a carbon tax, albeit slightly more cumbersome. Industries that emit carbon dioxide would have to buy permits to do so. A fixed number of permits would be auctioned each year. The permits would be tradable, so firms that found ways to emit less than they were entitled to could sell some of their permits to others. The system would motivate everyone to reduce emissions in the most cost-effective way. It would raise energy prices, which is the point, but it would also raise hundreds of billions of dollars, most of which Mr Obama planned to give back to voters. Alas, that plan looks doomed.
On May 15th Henry Waxman and Edward Markey, the Democratic point-men on climate change in the House of Representatives, unveiled a bill that would give away 85% of carbon permits for nothing, with only 15% being auctioned. The bill’s supporters say this colossal compromise was necessary to win the support of firms that generate dirty energy or use a lot of it, and to satisfy congressmen from states that mine coal or roll steel.
Giving away permits creates several problems. First, it generates no money, thereby royally messing up Mr Obama’s budget. Second, it means that the permits go not to those who value them most (as in an auction) but to those whom the government favours. Under Waxman-Markey, electricity-distributors would get the largest share, with the rest divided between energy-intensive manufacturers, carmakers, natural-gas distributors, states with renewable-energy programmes and so on. Oil firms, with only 2% of the permits, feel hard done by. But most polluters, having just been promised hundreds of billions of dollars’ worth of permits for nothing, are elated. So it is not just the owners of ski resorts and businesses with negligible carbon footprints that are queuing up to praise the bill. Duke Energy, a power generator with lots of coal-fired plants, is also enthusiastic.
Instead of having this complicated procedure rife for political giveaways, the simplest way to get people to use less energy is to tax it. With such a tax, people would decrease their usage and industries would find ways to provide more fuel efficient ways for our energy needs. The money gained from the tax could then be given to cushion the blow that it would be for taxpayers and businesses. But such a policy would be tough to pass in Congress and would leave politicians up to the accusation that they raised taxes. So better to have this convoluted cap and trade policy that will distort the market and leave politicians plenty of room to meddle away to get special benefits for their political supporters. And the President will dictate to the car companies which cars they should produce. Why not go for the simplest and clear-cut way to get people to alter their energy use?
Mr Obama admitted that more fuel-efficient cars might cost more. But he promised that motorists would save thousands of dollars by cutting their fuel bills. In fact, they can already cut their fuel bills by buying smaller cars, but most choose not to. Mr Obama could discourage petrol use more directly and efficiently by taxing the stuff, but that would be unpopular. Ideally, politicians who want to save the planet would be honest with voters about how much this will cost. But America’s leaders do not seem to think Americans are ready for straight talk about energy.
I usually oppose tax increases, but, if our goal is to decrease our dependence on foreign oil, I would support such a straightforward policy instead of a procedure like cap and trade that has been shown in Europe to be open for plenty of abuse.
6 comments:
If we want to reduce our dependency on foreign oil, I believe the best way is to increase domestic oil production. Sadly, our current President and Congress disagrees.
Exactly digits. California could use this as a way to stand on their own and correct their spending problems.
It was announced a day or so ago that Obama has made a deal to offer neuclear technology to the United Arab Emirates to generate electricity for their country. We are sending our expertise over there while we are not allowed to use it here. We get high taxes.
Think third world country.
We'll keep getting lunatic laws and regulations as long as we keep electing lunatics.
how long do you think our domestic oil reserves will last at current consumption rates?
Just curious to hear your view.
OH boy , i agree with all three. Tell me do i ever get to wake up out of this never ending bad dream?
I guess it is a good thing i live in a very small house for now. What happens though when my daughter and wife are back from over seas and they say moving time? helppppppppppppppp
Proven reserves in total are enough for ten years. But if we merely replace the 25% coming from the Middle East then obviously then 40 years becomes a possibility. But as of yet we still don't know how much crude there is because not even exploration in some areas has been allowed. And proven reserves are only those known to actually exist not just those thought to exist. During the 70's the forefathers of the chicken littles of today were moaning about how oil would run out by 1980 and then in the 80's that we would all be dead of AIDS.
It's instructive to remember that there was the famous Simon-Ehrlich bet that the former predicted any five commodity metals would be cheaper in ten years while the latter not only argued for them being more expensive but virtually mined out or unavailable at all. Simon won as the prices of copper, chromium, nickel, tin and tungsten declined as more was found.
Man has a talent for switching commodities when one actually does become in short supply. When the taller trees of the UK and the New World were harvested for masts for the Royal Navy was almost identical with the invention of the steam engine and the use of armor plate. The odor. disease and expense not to say the cruelty of horse drawn transportation was destroying the new urban centers of the US but the advent of the internal combustion engine solved that problem. And allowed the middle class to flee the inner cities for more comfortable and cheaper housing.
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