Cost-Free Cap and Trade

April 29th, 2009

Posted by: Roger Pielke, Jr.

Speaker Nancy Pelosi (D-CA) adds to a long series of comments by Democrats that emphasize cost as a crucial criterion for evaluating cap and trade legislation, and specifically, that there should be no costs:

“There should be no cost to the consumer,” House Speaker Nancy Pelosi (D., Calif.) said Wednesday. She vowed the legislation would “make good on that” pledge.

Of course, cost-free cap and trade defeats the purpose of cap and trade which is to raise the costs of energy, as explained to Congress by Robert Greenstein, of the non-profit Center on Budget and Policy Priorities:

Fighting global warming requires policies that significantly restrict greenhouse gas emissions. The most cost-effective ways to do that are to tax emissions directly or to put in place a “cap-and-trade” system. Either one will significantly raise the price of fossil-fuel energy products — from home energy and gasoline to food and other goods and services with significant energy inputs. Those higher prices create incentives for energy efficiency and the development and increased use of clean energy sources. But they will also put a squeeze on consumers’ budgets, and low- and moderate income consumers will feel the squeeze most acutely.

14 Responses to “Cost-Free Cap and Trade”

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  1. RogerCaiazza Says:

    The rationale for the “cost free’ cap and trade approach is described in the supporting documentation for the implementing rule for the Regional Greenhouse Gas Initiative in New York (http://www.dec.ny.gov/regulations/46996.html).

    The allowances are auctioned to “ensure that the full value of the cap-and-trade program inures to the consumers who pay for the Program”. According to the State of New York this will “better achieve the emissions reduction goals of the Program by promoting or rewarding investments in energy efficiency, renewable or non-carbon-emitting technologies, innovative carbon emissions abatement technologies with significant carbon reduction potential, and/or the administration of the Program”. Consumers have “cost free” impacts because analyses conducted by the State “demonstrate that investments in energy efficiency have the effect of reducing electricity demand and the overall cost of the Program”.

    Clearly there are any number of holes in this logic but this is what they will be arguing.

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  3. Green Ink: Car Wars, Cap-and-Evade, and Black Carbon - Environmental Capital - WSJ Says:

    [...] proposals have to make energy more expensive. Why are Democrats insisting it shouldn

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  5. stan Says:

    Washington DC has become a bizarre “intelligence-free” zone. The beltway apparently serves the purpose of a Looking Glass or rabbit hole. Once inside words mean precisely whatever Humpty Dumpty chooses for them to mean. Things are getting curiouser and curiouser.

    Diogenes once searched for an honest man. In DC today, his struggle would be to find a grownup.

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  7. adkellen Says:

    At least in the quote from the Wall Street Journal, she’s not also assuring us that cap and trade legislation will enhance our energy independence. That seems to be another bogus but frequently asserted claim advanced in favor of cap and trade. If anything, climate legislation may well reduce our energy independence, as utilities reduce the use of coal in favor of natural gas.

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  9. jae Says:

    ““There should be no cost to the consumer,” House Speaker Nancy Pelosi (D., Calif.) said Wednesday. She vowed the legislation would “make good on that” pledge.”

    Dammit, Roger, I choked on my coffee, again. You owe me a keyboard.

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  11. Sean_Wise Says:

    What floors me about this push from congress for cap and trade are two things. They must be aware that cap and trade in Europe has not been successful so why would anyone want to follow suit? The second is we have an economy reeling from the the excesses of broker manipulations and Congress wants Wall Street to set a price and make a buck on the gasses we exhale? What or who in heaven’s name is really pushing for this insanity?

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  13. jae Says:

    We need mandatory drug testing for Congressmen (and Congresswomen).

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  15. dean Says:

    I can’t speak for Pelosi specifically, but the cost-free concept often refers to the aggregate. Society pays more for the energy per unit, and the money is returned in tax rebates or lower rates for other kinds of taxes.

    Some who are willing and able to lower their energy use enough will actually make a profit, while those who will not or cannot reduce energy use will pay more. Maybe we need a special energy tax deduction for professions that prevent such economizing, like plumbers.

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  17. jae Says:

    Dean: I still don’t see how it can possibly work in a fair manner, no matter how they try to structure the tax system. It will be a regressive tax, period. For example, those who commute a long way to work will pay MUCH more “energy tax” than those who live close to their work. People with bigger families generally have bigger houses; so they pay far more for energy to heat their homes. Those on a fixed income will not be able to take advantage of tax breaks for improving energy efficiency, so they get clobbered. Voting for Cap and Trade is political suicide, IMHO.

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  19. stan Says:

    And we all know that no one in Congress would ever use the cap and trade regs to line their own pockets by granting exemptions or loosening restrictions. Noooo way.

    A massive bureaucratic nightmare, corrupt from the start and increasingly corrupt as the years go by. An incredible dead weight loss to the economy. And that assumes that the spenders in Congress don’t grab the money for their earmarks and actually return it to the consumer (yeah, right).

    Anyone who has faith that govt would do what it says, without massive corruption and bureaucratic bungling, is inhaling way too much fairy dust.

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  21. dean Says:

    Over time, fewer people will choose to live farther from their work if they don’t want to pay for it, but I’m not aware that is necessarily regressive since wealthy people sometimes live far away as well.

    Large homes take more energy to heat, but the issue is not the total they pay, but how much that changes. A large house is just as capable of being efficient as a small house. If you can make that large house very efficient, you can save money.

    There certainly are tradeoffs and no plan is perfect, but for those of us who believe that something serious must be done, stopping the free externality of greenouse gas emissions is essential. I personally favor carbon taxes over cap-and-trade. C-n-t is far too complex – too many ways to get it wrong.

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  23. jae Says:

    dean: Which planet do you come from?

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  25. Jon Frum Says:

    “I can’t speak for Pelosi specifically, but the cost-free concept often refers to the aggregate. Society pays more for the energy per unit, and the money is returned in tax rebates or lower rates for other kinds of taxes.”

    Stop, your killing me!

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  27. Tamara Says:

    “Over time, fewer people will choose to live farther from their work if they don’t want to pay for it”

    Provided they can sell their houses, and don’t mind living in over-priced (due to increased demand for urban housing) tenements.