April 15, 2009

More on the Green Economy

Perhaps the most consequential example of private interests potentially undermining environmental policy is the current push by utilities to have credits for a cap-and-trade system given away rather than auctioned, with the Obama administration even appearing to back away from support for the latter. Peter Barnes, inventor of the cap-and-dividend plan, dispatches the utilities' arguments for free carbon credits, then says:
So we may be heading for yet another giveaway of public wealth to private corporations—first banks, then auto companies, now utilities. The irony is that utilities aren’t failing and won’t be hurt by a carbon cap with auctions—they’ll surely pass permit costs through to customers. What we’re seeing here is simply a well-organized interest group trying to draw cash from the public till, and almost no one in Washington minding the store.
Quite so, although at least with free credits a cap-and-trade system can still work, even if it results in a massive transfer of wealth to utilities. The bigger problem may be the high proportion of carbon offsets in the Waxman-Markey bill currently under discussion. Not that offsets shouldn't ever be used, but given that there are no universally-recognized standards for offsets, and given the numerous fiascos over offsets in the recent past, they need to be severely limited in their use. Not only could an offset-riddled cap-and-trade system be inequitable, it could be completely ineffective as well.

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