The Case for Auctions

Ryan Avent and Kevin Drum focus attention on an important difference between the Obama and McCain climate change plans, Obama would auction tradable emissions permits to would-be emitters, whereas McCain would give them away. Either plan would increase the price consumers pay for energy and reduce the overall quantity of emissions (Obama sets more aggressive targets, but that's a separate issue) but the differences comes into play in terms of who gets the extra money generated by the higher energy costs.

In the case of the McCain plan, most of that money goes right back into the pockets of polluting industries in order to compensate them for the costs of no longer destroying the planet. In the case of the Obama plan, the money will accrue to the U.S. Treasury whence it can be spent to alleviate the burden on consumers by offering offsetting tax cuts, investments in transportation alternatives, subsidies for fuel efficient vehicles and alternative energy, etc. The McCain plan would be an improvement over the status quo, and certainly if compromising on the goal of 100 percent auctions is necessary to get a bill through the Senate I'm prepared to compromise, but the 100 percent auction is really a dramatically preferable option. The costs to individuals of adapting to a new low-carbon economy will be bearable but quite real and it's a very good idea to generate as much cash as possible to plow into helping people out with the transition.