Windfalls

Why consumer protection means selling carbon permits

Posted by Eric de Place (Guest Contributor) at 3:30 PM on 27 Mar 2008

Read more about: carbon tax | carbon trading | climate | business | economy

cash One of the thorniest problems in cap-and-trade programs is deciding how to distribute the carbon permits. Should the public sell pollution privileges or give them away for free?

Some folks worry that if we make polluters pay for carbon permits, they'll just raise prices for consumers. That's a perfectly legitimate concern. Unfortunately it turns out to be true, whether we sell the permits or give them away for free. Prices rise by the same amount in either scenario. (The only difference is whether polluters reap windfall profits or whether the public earns revenue from selling the permits.) It may be counterintuitive, but it's true.

It's also very hard to explain why this is the case without resorting to a lecture on economics. So in an attempt to clear things up, Sightline has put together this easy-on-the-eyes summary. It comes in four parts:

A simple explanation.
A slightly more detailed explanation.
A look at Europe's carbon trading market.
A review of the (basically unanimous) economic literature.

Take a look and let us know what you think.

For story: Windfalls
4 Comments | Post a Comment

Keep it simple.

The more detailed the explanations of cap n trade become the more obvious it becomes that we should simply charge a dumping fee for all pollutants released into the atmosphere that is set equal to our best estimate of the damage they do.

Things Everybody Should Know About Energy

by BILL HANNAHAN at 9:44 PM on 27 Mar 2008

Giveaway permits

So what really happened is that the european giveaway plan was scammed? No GHG reduction, consumers payed more (a "tax" passed on?) and the permits were traded, making more money for permit holders with no positive effect.

And an auction plan would collect revenue (a "tax" passed on?), the revenue then invested in renewables. A "new tax" to fund renewables is what the wing nuts will label it, in swiftboat style ads against green minded candidates for office.

Then hedge funds will gobble up the permits and send the price soaring, creating a GHG permit bubble.

In response to the "crisis" in energy cost inflation produced, the government will simply raise caps and dole out free permits to beleagured industries.

Just like the fed lowered rates and bought bad loans, bailing out the crooks by damaging the buying power of our currency, wages, and savings.

Subsidy diversion from big fossil, nuclear, and agribizz energy corporations to homeowners, farmers, and small businesses that invest in solar panels, wind, and biogas is the answer.

Forget cap and trade. Designed by economists, pushed by lobbyists, and benefitting only hedge funds.

10 cents per kwh subsidy directly to real people generating real renewable power and saving energy and GHG, that will work.

http://amazngdrx.blogharbor.com/blog

by amazingdrx at 10:20 PM on 27 Mar 2008

Permit giveaways in the Lieberman-Warner bill

The potential for windfall polluter profits from permit giveaways would be realized if the Senate's Lieberman-Warner bill were enacted into law. Rather than auctioning off all permits -- and making polluters pay for all pollution -- the bill gives hundreds of billions of dollars of permits to industry for free.

Friends of the Earth Action (where I work -- full disclosure) is waging a campaign to "Fix or Ditch" Lieberman-Warner. You can learn more at Lieberman-Warner.org.

by Nick Berning at 6:24 AM on 28 Mar 2008

Much simpler.

Free public transit.

Why do we invest billions in public transit, then slap on a tariff to discourage its use? Think about it.

http://frepubtra.blogspot.com

by socialscientist at 6:55 AM on 28 Mar 2008

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