Trevor Hicks - Cap & Trade

Cap & Trade

on Jul 04 in Climate Change, Politics tagged by Trevor Hicks

I find myself unusally upset about the Waxman-Markey Cap and Trade energy bill wending its way through Congress. I’m already a cynic and indeed I kind of predicted this outcome a couple of years ago. But it still bugs me because the US is heading towards an extremely expensive and utterly useless symbolic gesture to show we care about the environment. The House is dislocating its shoulder patting itself on the back for finally standing up and doing something about climate change. I’m worried about climate change too, but this bill is just a rotten idea.

The first problem is in choosing cap and trade over a simple and efficient carbon tax. Presumably this hides the cost of controlling emissions from the public. How insulting. What’s wrong with an honest debate on the topic that honestly says to the people that if you want to curb carbon emissions you’ll have to pay?

Worse, cap and trade is really a huge reward to the Wall Street banking and trading firms that, um, haven’t exactly earned such a windfall from the government. It’s an entirely new class of commodity to trade, this means dozens of new million dollar a year Wall Street jobs. I’m not sure how that protects the climate. And good luck repealing cap and trade if we decide later that attempting to control carbon emission is a futile and expensive foray into making ourselves feel good about ourselves for “doing something” about the climate. How difficult would it be to repeal a carbon tax in that case? Does Washington control Wall Street or is it the other way around?

What is most expensive about this bill though is the fact that the emissions permits are mostly being given away to the incumbent emitters. Not only does this deprive the public the compensation it ought to receive for the negative externalities of carbon emissions, it’s the kind of government action that is fatal to a dynamic economy. This huge endowment for the wealthy and powerful incumbent firms, close to a trillion dollars worth according to the CBO, will stifle entrepreneurship and innovation. New firms will have to buy the right to compete from existing firms.

This bill with its massive transfer of wealth from the general public to Wall Street and existing Big Business is crony capitalism at its economy-killing worst and it just goes to show that Democrats are just as craven as the Republicans when it comes to paying off their corporate masters. But even all that could be stomached if the bill actually did something to impact the climate, unfortunately according to the IPCC arithmetic regarding emissions and temperature (that you can run yourself: http://www.cgd.ucar.edu/cas/wigley/magicc/index.html), it will shave .09 degrees F off the global temperature by 2050, or delay warming by a total of 2 years. Wow.

Totally. Not. Worth. It. I find myself in the very uncomfortable position of hoping the Senate has better sense.

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