Cap-And-Trade and Politics

Michael Giberson

From Environmental Capital, reports that selling all greenhouse gas emission permits under a cap-and-trade scheme may not be politically attractive:

Europe already saw what happened when it gave away emissions permits—utilities gobbled up more than 100 billion euros in windfall profits.

The pain for the consumer—i.e., the voter–will be the same whether the permits are sold or given away.

Writer Keith Johnson notes that “for the overall emissions-targets to work, prices would have to rise more in other parts of the economy to compensate” (if, that is, giving permits to utilities serves to limit power price increases).

Billions in profits for companies well represented in D.C. versus non-transparent price increases in unspecified other industries? I guess we can work out the political calculus easy enough.

And for readers who think this is a reason to prefer a carbon tax…, well, I’m not convinced that lobbyists or their congressional aides would keep their hands off the tax code, either.

One thought on “Cap-And-Trade and Politics

  1. All of the focus appears to be on the emissions allowance auction or emissions tax issues.

    The real issue is the investment which would be required to actually reduce carbon emissions in the US by “80% by 2050”. I estimate that investment at ~$700 billion per year. However, if the rest of the nations on the globe don’t also reduce their carbon emissions to the same extent, the result is probably meaningless.

    IEA ha estimated the global investment required to reduce global carbon emissions by 50% by 2050 at $45 trillion. The next 30% would likely require investment of an additional $45 trillion, assuming that the easier, cheaper investments would be made first.

    Then, we come to grips with the fact that even an 80% reduction would not be enough to stabilize atmospheric carbon concentrations. That would require a 99.95% global reduction, back to the emissions levels in ~1750, when atmospheric concentrations began to rise. That would likely take the global investment to ~$150 trillion.

    With apologies to the late Senator Everett McKinley Dirksen: “Trillions here, trillions there, pretty soon you’re talking about real money”.

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