May 13, 2008
Carbon Trading: McCain vs. Obama (With Mankiw as Ref)
The Harvard economist Greg Mankiw weighs Sen. John McCain’s views on carbon trading against Sen. Barack Obama’s.
“Over time an increasing fraction of permits for emissions could be supplied by auction,” McCain said, “yielding federal revenues that can be put to good use.”
“Not bad,” responds Mankiw, “but … why over time? Why not immediately? And how high would that fraction become?”
Mankiw likes Obama’s support of a cap-and-trade system through “a 100-percent auction.”
Alex Kafka | Posted on Tuesday May 13, 2008 | PermalinkComments
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The economists who do this sort of research find that a 100% auction may not be optimal, especially considering the probability of implementation. Here is blog post on the issue: http://www.env-econ.net/2008/05/i-wont-sign-the.html. .
— John Whitehead May 13, 10:36 AM #
If you read between the lines (and the papers Whitehead links to), the issue has nothing to do with whether 100% auction is “optimal”. Rather, a few authors, including Whitehead, think that business interests will be able to block a carbon cap unless we pay them ransom in the form of freebie permits. Such policies are optimal only in the way that making ransom payments to kidnappers is optimal. It’s something you do if you have no choice — but it’s not a policy, and you don’t start out by proposing it.
Incidentally, the pressure to mollify business will be reduced to the extent that the cap is imposed upstream, where carbon fuels are injected into the economy, which is also the most flexible and efficient approach. My guess is that the public will be willing to ignore the bleats of oil, coal and gas companies.
— Peter Dorman May 13, 04:05 PM #
As an environmental scientist I recognize that cap and trade/pollution trading is a very good way to control pollution. It internalizes the costs that are otherwise born by society instead of the sources. These kinds of systems have been implemented before and allowed the economic system to force reductions in pollution. This is one of the most effective ways to create markets for nonmarket goods and services such as “the atmosphere as a waste depository.”
— malcolm mccallum May 13, 07:03 PM #
scam
— Sergey Vlogev May 14, 12:13 PM #