Cancel
Advanced Search
KEYWORDS
CATEGORY
AUTHOR
MONTH

Please click here to take a brief survey

Spewing Carbon, Blowing Smoke

Repeat after me: giving polluters free carbon permits would be bad for consumers.

CBO said it, Dave Roberts and Matt Yglesias said it, and I'll say it too:

If we establish a carbon cap, giving away free carbon permits to big carbon emitters will hurt the middle class and poor at the expense of the well-off.

The chart below, from the Congressional Budget Office, shows the effects fairly clearly...

CBO%20chart

The the bars to the left show what happens under a "Cap-and-Cashback" carbon policy -- i.e., auctioning off carbon permits to major emitters, and giving an equal share of the auction revenue to every US citizen.  Under Cap-and-Cashback, the lower income groups do pretty well; folks with middle incomes are more or less held harmless; and higher-income folks who use more energy, and who also have a bit more give in their budgets, wind up paying a bit extra for their emissions.

The middle and right-hand groups show what happens under various "Cap-and-Giveaway" proposals-- that is, if we give the value of carbon permits to companies either directly, or through corporate tax cuts.  Under Cap-and-Giveaway, lower and middle-income folks do terribly, losing a significant chunk of after-tax income.  Even the relatively well-off folks in the next-to-highest income group do worse than they do under Cap-and-Cashback.  But the wealthiest group does great -- they actually gain income from carbon giveaways.  After all, the folks at the top own most of the energy companies who will reap the big profit windfalls from Cap-and-Giveaway.

Unfortunately, it's frustratingly difficult to explain why giving free permits to companies is such bad news for ordinary consumers.  If polluters gets something for free, how can they possibly charge for it?  Well, they just can -- just the way scalpers can charge for free tickets they find on the ground.  The whole thing is a bit like the Monty Hall brain teaser that made the rounds a decade or so ago -- there's one answer that's indisputably correct, but it can be very, very hard to see why.

But precisely because the economics are confusing, major polluters are blowing all sorts of smoke about Cap-and-Giveaway -- claiming that the only way to protect consumers is to give big energy companies free carbon permits.  That's exactly backwards.  It makes you wish that there were some sort of truth-in-advertising law.  But since there's not, the only antidote I can think of is simple repetition.  So repeat after me:  Giving away free carbon permits to polluters is bad for consumers.  Giving away free carbon permits to polluters is bad for consumers.  If everyone out there starts reciting that, perhaps I'll be able to take a break someday...

This piece originally appeared on the Sightline Institute's blog, The Daily Score
Bookmark and Share


Comments

I have been thinking about this, and it seems that both the plan on the left and the plan in the middle are idiotic. Constantly dishing out tax cuts is one of the mindsets that led us into this unsustainable situation we have now.

Instead of tax cuts, how about we just sell the permits and use that revenue to fund smart growth and prizes for contributing to the technological commons. Everybody wins.


Posted by: Edward on 24 Mar 09

Post A Comment

Please note that comments will remain open for only 14 days after the article is posted. While previous comments will remain visible, attempts to post new comments after this period will fail. This helps stop comment spam, so your forebearance is appreciated.

The Worldchanging comments are meant to be used for further exploration and evaluation of the ideas covered in our posts. Please note that, while constructive disagreement is fine, insults and abuse are not, and will result in the comment being deleted and a likely ban from commenting. We will also delete at will and without warning comments we believe are designed to disrupt a conversation rather than contribute to it. In short, we'll kill troll posts.

Finally, please note that comments which simply repost copyrighted works or commercial messages will be summarily deleted.

REMEMBER PERSONAL INFO?
Yes No

NAME


EMAIL ADDRESS


URL


COMMENTS



EMAIL THIS ENTRY TO:

YOUR EMAIL ADDRESS:


MESSAGE (optional):


Search Worldchanging

Worldchanging Newsletter Get good news for a change —
Click here to sign up!


Worldchanging2.0


Website Design by Eben Design | Logo Design by Egg Hosting | Hosted by Amazon AWS | Problems with the site? Send email to tech /at/ worldchanging.com
©2012
Architecture for Humanity - all rights reserved except where otherwise indicated.

Find_us_on_facebook_badge.gif twitter-logo.jpg