A Question For Megan McArdle!


610 pollution on Y river.png

Concerning the history of the Waxman-Markey cap and trade bill, Megan writes:

Now, everyone on the left was united in favoring auctions over giveaways. Auctions also had a fair amount of support on the right, mostly from people who hate corporate welfare even if they also oppose cap-and-trade. ...[B]ut the fact is that at the end of the day, you couldn't do this perfectly obvious thing that has surprisingly broad support among the policy elites of both parties. Instead, the bill was passed in a form that makes it more expensive, and almost totally ineffective.

I agree with Megan that auctions were a perfectly obvious thing to do. Still, I have a question for her: What's the connection between the the fact that the permits are being given away and the fact that the bill is now "almost totally ineffective"? I'm not sure I see a connection between these things.

A little plagiarism from last week: Waxman-Markey has warts, and in many ways a carbon tax would be simpler and fairer than a cap and trade system. Nonetheless, it seems to me that C&T does have one feature that is a nice bulwark against the harms of lobbying: It puts a strict cap on emissions. This means that industry lobbyists can affect how permits are distributed -- who gets them and when -- but changing the permit distribution process cannot raise the overall level of emissions that will occur.

I still think the distribution of permits is important. By giving some portion of the permits away, the government might be rewarding one industry over another, or rewarding firms that currently occupy a market over firms that might want to enter it in the future. That is unfair. But those concerns about fairness can and should be separated from concerns about the environmental effectiveness of the bill. Or do you disagree, Megan?

Nota Bene: Two additional thoughts. First, it's possible that the offset program in the bill will raise the overall level of emissions, if it is subject to lax oversight. Second, it's possible that the C&T giveaways will raise the number and amount of transaction costs in the carbon market, per this helpful comment from last week. Photo: Pollution along the Yangtze River, China. I continue to find Wikimedia's collection of air pollution photographs oddly striking.


Presented by

Conor Clarke is the editor, with Michael Kinsley, of Creative Capitalism. He was previously a fellow at The Atlantic and an editor at The Guardian. More

Conor Clarke is the editor, with Michael Kinsley, of Creative Capitalism, an economics blog that was recently published in book form by Simon and Schuster. He was previously a fellow at The Atlantic and an editor at The Guardian. He is also on Twitter.

How to Cook Spaghetti Squash (and Why)

Cooking for yourself is one of the surest ways to eat well. Bestselling author Mark Bittman teaches James Hamblin the recipe that everyone is Googling.

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register.

blog comments powered by Disqus

Video

How to Cook Spaghetti Squash (and Why)

Cooking for yourself is one of the surest ways to eat well.

Video

Before Tinder, a Tree

Looking for your soulmate? Write a letter to the "Bridegroom's Oak" in Germany.

Video

The Health Benefits of Going Outside

People spend too much time indoors. One solution: ecotherapy.

Video

Where High Tech Meets the 1950s

Why did Green Bank, West Virginia, ban wireless signals? For science.

Video

Yes, Quidditch Is Real

How J.K. Rowling's magical sport spread from Hogwarts to college campuses

Video

Would You Live in a Treehouse?

A treehouse can be an ideal office space, vacation rental, and way of reconnecting with your youth.

More in Politics

Just In