Tuesday, July 01, 2008

Cap and Trade sounds nicer

I predict (with confidence of about 68.3%) that early next year Congress will vote to do something about global warming. As Bryan Caplan puts it:
Something must be done.
This is something.
Therefore, this must be done.

With both McCain and Obama proposing cap and trade systems, it looks like that's what we'll get.

I'd rather just have a straight greenhouse-gas-tax. It's too easy to cheat with cap&trade (as Europe seems to be finding out-- it looks like their system isn't working very well), and cap&trade creates more inertia-- everybody who makes money trading emission permits under a cap&trade system will lobby VERY hard against changing a system that pays their salary. If, 50 years from now, somebody figures out a clever way of either reversing global warming or if it turns out rising temperatures and ocean levels isn't as big a problem as we think, we'll be stuck with an antiquated system that just makes a few rich people richer.

A tax would be simpler and more transparent. Which, I think, is part of the reason it has no chance of being adopted.

I think the other part of the reason is because "tax" is a dirty word. Nobody likes taxes, and politicians bend over backwards to avoid using the "t" word ("It's not a tax, it's a user fee!").

But Cap and Trade has something for everybody! Lefties like the Cap part-- we'll Cap emissions and save the environment! And Righties like the Trade part-- we'll Trade our way to economic bliss!


Paul G. Silva said...

Gavin, did you hear the old EconTalk show at http://www.econlib.org/library/Downloads/y2007/Yandlecommons.mp3 - they had some fascinating historical experiments - such as Prussia's experiment with turning rivers into corporations.

Gavin Andresen said...

I'm listening to it again now.

Cap and Trade has worked for acid rain here on the East coast, so creating a market for the right to pollute CAN work.

If we get Cap and Trade that's:
1. fair: no exceptions for coal-burning plants in some powerful Senator's district, and some mechanism that prevents companies from simply moving carbon-intensive manufacturing offshore).
2. spending-neutral: I'll be really sad if the revenue from Cap and Trade gets spent on either some pet project (Ethanol! No, wait, Solar! No, no, NanoTechnology Batteries and Hamster Wheels!) or a war with Iran.
... then I'd be happy.