Economics

Kneecapping Cap-and-Trade

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Irwin Stelzer at the D.C. Examiner sees a few problems with Obama's version of cap-and-trade plans to reduce carbon emissions:

[Cap-and-trade] has nothing to do with the stimulus package into which this green agenda has been inserted. It takes years to get permits for new windfarms and transmission lines, by which time we hope the recovery will be well underway.

The second problem is the volatility of the price of permits. The goal is to make it so expensive to emit greenhouse gases that polluters will switch to other, greener means of producing energy. But significant investment in greener technologies can occur only if investors can calculate the costs faced by their CO2 -emitting competitors.

In Europe, the price of permits has fluctuated between zero and around $40 per ton. Green technologies that were economic, and could attract capital when permits fetched $40, are uneconomic when the price at which permits trade is far less, as it now is (about $10).

The third problem is that a recession is a bad time to load costs onto businesses and consumers. The Obama team counters that the levies won't cut in until 2011. But for businessmen planning long-term investments, that is right around the corner, and the uncertainties associated with cap-and-trade will surely discourage investment.

The fourth problem is that Obama has promised that no family earning less than $250,000 per year will pay one dime in higher taxes. But the companies that have to pay for permits will pass that cost on to consumers in the form of higher prices for electricity and other products. So these families will pay $645 billion, only some of which will be returned in the form of lower income taxes, for a system that is terribly inefficient.

The solution, of course, would be a straight-forward tax on carbon, the proceeds to be refunded through the payroll tax system. But unlike the hidden tax of cap-and-trade, a carbon tax is out there for the voters to see. And given the choice between a stealthy tax and a visible tax, politicians will pick the former every time.

Ron Bailey has written often for Reason Online about cap-and-trade.

Back in May 1996, I wrote an article on the early theory and practice of cap-and-trade for emission control, back in the days before carbon was on everyone's mind.

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  1. This scheme seems almost surreal. The world has felt surreal since 9/11. When will the world go back to normal. I want someone to tell me where the dead Wicked Witch of the East is so I can take her ruby slippers and click my heals together. The world is insane.

  2. There goes some one getting all analytical on “The One’s ” great, greenie friendly plans. How DARE you question the wisdom of The One. Don’t you know he can do no wrong?

    Unlike in the clipped piece of the article, the soloution is NOT a straigt forward tax on carbon. The solution is to stop worrying about a trace gas in the atmosphere that is critical to all life on earth. The solution is also to stop trying to foist a leftie gaia religion on the rest of us. Go wear a horse hair shirt if you want, don’t expect me to.

  3. The fourth problem is that Obama has promised that no family earning less than $250,000 per year will pay one dime in higher taxes.

    And they won’t.Sounds like you are listening to Rush Limbaugh a little too much Brian Doherty. Nice little wing-nut think tank job you have there, wouldn’t want anything to happen to it.
    You just stick to stories about our medical marijuana policy, Austan Goolsbee and Cass Sunnstein, OK?

  4. But they mean well!

  5. They won’t pay any more money in taxes, but they’ll pay more in fees, surcharges, tolls, levies, and cost-passing by those evil corporations. But those aren’t taxes. Mhmm. So while the government will get around 75% of your paycheck, only 42%(for ‘the rich’) will be in actual taxes. So shut up and quit bitching. It’s not the same thing.

  6. Back in May 1996, I wrote an article on the early theory and practice of cap-and-trade for emission control, back in the days before carbon was on everyone’s mind.

    That is, before it became obvious that AGW was a big swindle.

    O.S.
    “The fourth problem is that Obama has promised that no family earning less than $250,000 per year will pay one dime in higher taxes.”

    And they won’t.Sounds like you are listening to Rush Limbaugh a little too much Brian Doherty. Nice little wing-nut think tank job you have there, wouldn’t want anything to happen to it.

    The argumentation toolkit of the leftist wacko: Assertion, Ad Hominem, Irrelevancy, Shifting the Focus.

    A cap-and-trade system is a tax on production, which means in economic terms a higher price for consumer goods – so we’re talking about a TAX on the poor and middle class. So, they WILL.

  7. Is it just me, or is participation on H & R dwindling? How are the donations going?

  8. Thanks to Obama, my wife and I are getting a divorce. God willing, we can both make $199.000 as individuals without a tax increase, yet if we stay married we can only make $250,000 jointly before we’re clipped for Obama’s tax hikes. Credit to Michael S. Dunn in today’s WSJ letters.

  9. Thanks to the latest crisis of unfettered capitalism, my wife and I are living in a tent.

  10. Too bad. You should have tried harder.

  11. Oh, yeah, blame the victim. Cling to your free-market dognmatism like a pre-Vatican II nun to Jesus, you sniveling fanatic.

  12. Good one, Lefiti. I’m glad you’re making it through the new spoof filter.

  13. Your wife clings to my free market dongmatism.

  14. Market fundamentalists of the world, Unite! You have nothing to lose.

  15. The third problem is that a recession is a bad time to load costs onto businesses and consumers

    Unlucky Obama and his adoring disciples: this inconvenient economic recession is ruining all their noble schemes! It’s funny in a way, if you ignore for a while the fact that his haphazard quick-fixes and half-baked economic policy might very well throw the country and the world into a gen-you-wine depression. It’s also quite funny that Dear Leader’s hair will will be snow-white by year’s end. He’ll be our very own Mandela! Will Obama Girl toss him for a sexier model?

  16. [Cap-and-trade] has nothing to do with the stimulus package into which this green agenda has been inserted.

    Oh, he’s so close. Cap and trade actually undermines economic growth, so its not that it has nothing to do with the stimulus, its that it actively undermines the stimulus.

    Really, I don’t want to go all troofer on you, but its get harder to dismiss the possibility that Obama and the gang that can’t pay taxes are actually trying to destroy the wealth (read: economic independence) of the investing class. Its hard to see what more they could do.

  17. It’s only been six weeks. Give ’em time.
    There will be ample opportunity in the months ahead to out-FDR FDR.

  18. “… but its get harder to dismiss the possibility that Obama and the gang that can’t pay taxes are actually trying to destroy the wealth (read: economic independence) of the investing class.”

    This is a wonderful example of the moronic drivel that a true believer in a simplistic all-explaining ideology is capable of. Thanks.

  19. “The solution, of course, would be a straight-forward tax on carbon, the proceeds to be refunded through the payroll tax system.”

    No the “solution” is to acknowledge that there is no proven problem in the first place and not only NOT implement any sort of carbon tax scheme but to immediately eliminate all the “alternative” energy mandates and subsidies that exist now.

    Oh yeah – and drill, baby drill!

  20. People have been moving to the South and Southwest and abandoning the northern industrial areas and one major factor is to escape the cold winters. Now the South and Southwest are facing severe water shortages. The northern industrial areas have an abundance of water. Global warming, if it were happening (which, unfortunately, it is not)would be a major benefit. People could migrate north to more inhabitable areas and reduce population pressures on the southwest desert areas (like Phoenix). Why waste any money on trying to stop it even if it existed and we had any impact on it?

  21. dm, have you ever heard of Bangladesh?

    Seriously though, AGW is bullshit.

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