In "Another comment on Waxman-Markey", Charles Kolstad (co-editor of the AERE journal, Review of Environmental Economics and Policy) concludes:
Although the bill has its shortcomings, at its core it is an impressive
piece of legislation. If the senate trims some of the glaring defects,
then the U.S. will become the world leader in taking global warming and
climate change seriously.
After a quick review of cap-and-trade, Kolstad takes aim at three concerns:
... (1) that
permit costs will drive up the cost of everything in our economy and
hit the average citizen hard in the pocketbook; (2) that certain
industries will be put at an unfair competitive advantage, causing jobs
to migrate to China; and (3) that the carbon cap is too lax and too
many permits are given away.
Although it
is true that permit costs will be passed on to consumers, the respected
nonpartisan Congressional Budget Office estimates the costs per
household to be $165 per year – hardly a heavy burden. Furthermore, the
costs are fairly evenly spread among various income classes.
In
terms of industries that will be hard hit, it is true that some
industries that emit a lot of carbon or use a lot of fossil-fuel-based
electricity may see their costs rise. Most industries will see costs
rise less than 1%. A few industries will see larger increases, but most
of these are bulk-material industries (such as cement), the production
of which is highly local and not likely to move overseas. ...The bigger
picture, however, is that there may well be job losses in some sectors
but gains in others, as cleaner energy technologies grow.
Another
criticism is that the bill has very weak targets for reducing
greenhouse gases. It is true that for the next five to ten years the
cap is quite loose – in fact it increases every year through 2016. And
as a result, during this period, the price of allowances is expected to
be very low. But eventually, and this is the important part, the cap
does tighten. In twenty years, the goal is to have greenhouse gas
emissions 42% below 2005 levels. That would be a remarkable achievement
that would overshadow any slow beginning or temporary giveaways that
might be in the bill.
But the problem without a comeback is this:
Probably the biggest
shortcomings in the bill are not the cap-and-trade portion but all the
other sections, particularly those dealing with agriculture and
biofuels. Biofuels, for instance, are exempted from the cap even though
they can be a major source of GHGs. Agriculture is generously granted
offsets that can be used in lieu of permits, and the offset program is
overseen by the U.S. Department of Agriculture.
Good luck to the Senate getting rid of those!
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