Cap and Trade: Giving More Than 100 Percent
Posted August 11th, 2009 at 4:03pm in Energy and Environment 
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In 2007, during his presidential campaign, President Obama told Grist:
I believe that, depending on how it is designed, a carbon tax accomplishes much of the same thing that a cap-and-trade program accomplishes. The danger in a cap-and-trade system is that the permits to emit greenhouse gases are given away for free as opposed to priced at auction. One of the mistakes the Europeans made in setting up a cap-and-trade system was to give too many of those permits away. So as I roll out my proposals for a cap-and-trade system, I will price permits so that it has much of the same effect as a carbon tax.”
(Thanks to Greg Mankiw and his must-read op-ed in the NY Times)
Approximately 2,340 energy lobbyists worked on the cap-and-trade bill to do what President Obama said we shouldn’t – hand out allowances costs to utilities and other industries direct revenue to them. Opposition to this huge energy tax bill wheeling, dealing and arm-twisting to eke out the narrowest of majorities. They promised generous handouts for various industries and special interests but, in typical Washington fashion, they gave away more than they had.
As shown by the chart above, for the years 2016 and 2017, Members of Congress gave away 100.7 percent and 100.2 percent of the allowance allocations, respectively. Electric utilities are the biggest winners of the government allowances sweepstakes, while giveaway for natural gas, home heating oil and refineries are relatively small. The bill guarantees that the revenues from 15 percent of the allowances sold at auction will go to low-income consumers. Other allowance revenues go to investments in clean energy as well as domestic and international adaptation efforts to offset the supposed damage from global warming. Notice how the cost of allowances rise dramatically as the caps on carbon and other greenhouse gases become more stringent.
Free allowances are not an exception to the “no free lunches” maxim. Giving away allowances does not lower the costs of cap and trade; it merely shifts the costs around. Congress can play musical energy with Byzantine allowance-allocation schemes, but when the record stops, average energy prices have to go up enough to cut energy use dramatically.
Cutting the pain for one group simply multiplies the pain for another.
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4 Responses to “Cap and Trade: Giving More Than 100 Percent”
Chris, Tampa, Iraq Veteran on August 11th, 2009 at 4:03pm said:
This is crazy, (no way) should this even be talked about. I’m so tired of the Dem’s pulling our countries stings. And I’ve read allot of blogs lately and it seems they all sound like Obama. No real points are made! It’s one of two things either entiltlement or attack somebody, if I hear Bush did that or Bush did this one more time. Who cares!!!!!! I’m worried about the constitution that I fought for, being destroyed, and freedoms disappearing before my eyes. I will not trade my freedom for welfare, or free medical care. Can’t you people see that the more poor people there are in this country the more power dem’s will have. They don’t think the population is smart enough to take care of itself, no one at the bottom will be better off. The Dem’s are just going to make the middle class more lower class so we are all dependent on them. They could care less about the environment. Snap out of it kool-aid drinking Obama Drones. And if your gonna blog tell me whats great about the plan’s he’s laying out, give me one fact to support well, anything. Don’t just bash Bush, or say Obama cares about you, or I hope or we need change, or I believe. Believe in yourself’s, your much better off without out the government being your Mommy. If we read this bill on cap and trade and then each take a ballot and vote on it. It will lose 100/100 times.
Richard Fletcher, San Diego on August 11th, 2009 at 4:03pm said:
Chris is entirely correct! This is all a bunch of bunk.
Paul Terry Stone on August 11th, 2009 at 4:03pm said:
The entire bill and the allowances are bad enough but how they could give away more than 100% of the allowances is inconceivable to me.
JK, Arizona on August 11th, 2009 at 4:03pm said:
Since when do they think twice about “spending” more than they have? Surprised it’s not 150%! They missed the boat – could have bled the country more to get a feeble kickback somewhere from a lobby that receives more credits.
If only we could form a revolution. The basis would be on violations of the Constitution. All elected members of the Legislative and Executive branch would be reviewed and if necessary, brought to charges of violating the Constitution. The enforcement would be handled by the Marine Corp – who are sworn to defend the Constitution against all enemies, foreign and domestic. Based on the degree of violation, those top offenders would be declared enemies of the state and removed from office and or jailed immediately. Don’t care what party. We’d definitely have a mass of emergency elections. And if it happened once, the hope is it would deter the next in line to commit the same crime. Annual action to keep the house clean.
Just dreaming……