Cap and Frayed

Here’s Kevin Drum on what he concedes is the most ambitious cap and trade legislation Democrats can realistically hope for:

First, their [the Waxman-Markey] cap-and-trade program allows a lot of offsets: two billion tons in all, which allows companies to pollute away as long as they “offset” their carbon emissions somewhere else.  In theory, this is fine, but in practice it’s an invitation to abuse, substituting purely fictional reductions for real ones.  Second, it allocates a portion of the emission credits directly to affected industries instead of auctioning 100% of them.  This is yet another invitation to abuse.

It’s possible, of course, that both of these things can be beaten into submission with the proper oversight and regulation.  But what are the odds?


A bill that started out with no offsets and no allocation might eventually end up with offsets and allocation.  But what happens to a bill that caves in on these issues right at the start?  It gets even worse as it wends its way through the sausage factory, that’s what.

As Ezra says, Markey and Waxman are as good as they come on this stuff, and if they don’t believe that a clean bill stands a chance even as an opening bid, they’re probably right.

Drum is right about those “invitations to abuse,” which is to say, mechanisms that practically gurantee abuse. And Drum’s right that it’s only going to get worse. The “opening bid” comes from some of the most zealous environmental ideologues in Congress. And the sausage factory is about to come online. Yet Drum remains hopeful! We’ll see how he and his comrades feel about what I’ll bet will be a gutted and impotent scheme good for little but corporatist jockeying for government-enforced advantage over competitors. If it turns out that way, will he want to kill it then? The folks who kept telling us that cap and trade and a straight carbon tax are “equivalent” were always full of it. There’s this thing called “politics,” you see, which does not treat them equivalently. 

Here’s my column on cap and trade as a spectacular instance of corrupting and unstable political capitalism.

Author: Will Wilkinson

Vice President for Research at the Niskanen Center

11 thoughts

  1. Any carbon tax at this point in the economic cycle is suicide. I don't think you want to throw the shackles on until you are at a point when an alternative is viable. Pctax = innovation <= Pnada = innovation. I would prefer government market intervention via some funding/prize mechanism over a tax. Funding/Prize might accelerate innovation without screwing up the market too much. Of course the problem is we can't predict innovation. Damn.

  2. The federal tax code is pretty complicated. It's not clear that a carbon tax would be less open to loopholes and exploitation than a cap and trade system. But you might be right.

  3. These moveable goalposts are about as valid as measuring the success of an economic program by “jobs saved.” Well, we know one area where new jobs will be created–the creation of a bureaucracy to administer this Rube Goldberg system. Competitors like China and India that create real goods and services must be falling on the floor laughing out loud at the myriad ways we are handicapping our industries.

  4. Look Wilkinson, you know that anything referred to as a “tax” is political suicide. So long as the harm from an action is attenuated from its cause (as in this case) the public will not support a direct solution such as a carbon tax. If you believe global climate change is truly a problem that needs to be addressed then sooner or later you have to pick something. Though it be not perfect, something has to be better than nothing. Later on we can work to make it rigorous enough to effectuate its intended purpose.

  5. I disagree that anything called a tax is political suicide. I think an electorate who understands a revenue-neutral carbon tax–a tax rebated to them in the form of a rebate or with a tax-shift approach–already supported by the majority of leading scientists, economists and opinion leaders can be a political winner, especially when compared to the debacle that has become the cap and trade debate.

  6. Conservative “intellectuals” should read a few introductory textbooks and stop spreading their ignorant anti-science, anti-economics propaganda to the masses. Conservatives can be unbelievably stupid when it comes to climate change (“It snows outside! Global warming is BS!”) or basic economics of taxation.

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