Carbon Taxes vs Cap-and-Trade

A review of the equivalence of carbon taxes and cap-and-trade:

Carbon taxes vs cap-and-trade, by Stephen Gordon: There are now several plans for reducing greenhouse gas emissions bouncing around the political landscape. ...

It's important to remember that in almost every way that matters, the [carbon tax and cap-and-trade] approaches are equivalent. But..., this point is easy to overlook. So as a public service, here is the Econ 101 explanation of how the two policies work, and why they are equivalent.

Before the policy, the intersection of the supply and demand curves for ghg-emitting products - point A on the graphs - will generate emissions equal to Q₀, and the price will be P₀. Suppose that the government wants to reduce the quantity to Q₁.

• Carbon tax: Suppose that a carbon tax π is added into the price. For a given quantity, the supplier's price will be the old price plus the amount of the tax, and the supply curve will shift up to S*. The new equilibrium is at point B, the quantity is the target Q₁, and the price will increase to P₁. Note that the price increase will be less than the tax, although if the demand curve is fairly steep (i.e., inelastic, or relatively insensitive to changes in price), the increase in the price will be pretty close to π.
• Cap-and-trade: Suppose that the government restricts emissions to a level consistent with Q₁. The new supply curve - denoted by S* - is now vertical at the target: no matter how high the price goes, supply will remain fixed at Q₁. The new equilibrium is again B: the quantity is determined by the cap at Q₁, and the price will rise to P₁.

So as far as prices and quantities go, the two policies are equivalent: as we go from A to B, quantities fall to the target Q₁, and prices rise to P₁. From the consumer's point of view, that's all that matters.

What distinguishes the two is what happens to π - the difference between the price the consumers pay at B and what it costs suppliers to produce at Q₁. In the case of the  carbon tax, the money goes to the government. But if output is capped at Q₁, that difference is pure profit: a permit to produce one unit of output allows its owner to collect a rent equal to to the difference between the selling price and the cost of production. If permits are traded, their price will be bid up so that their price will be equal to π. So where that money goes depends on how the permits are allocated in the first place. If the permits are simply given to existing emitters, then those profits are pocketed by the firms. If the permits are auctioned off, the price will be bid up to π, and the government gets the money.

So if permits are auctioned off by the government, then cap-and-trade and a carbon tax are equivalent: same quantities, same prices, and the government gets revenues equal to the area in the green rectangle in the graphs.

For more, see ECON 101: Carbon Tax vs. Cap-and-Trade by John Whitehead at Environmental Economics.

Update: More on this topic here. Tyler Cowen comments. My reply.

Update: See also How Low Income Consumers Fare in the Senate Climate Change Bill, CBPP.

Update: Ryan Avent responds to (and disagrees with) Pete Davis (see next update) in One Last Thing on Cap and Trade.

Update: Pete Davis at Capital Gains and Games explains why politicians favor cap-and-trade over carbon taxes:

Carbon Tax: How Much, How Soon?, by Pete Davis: The climate change debate began in earnest in the Senate yesterday afternoon. Few are questioning the science anymore... The question is how best to control carbon emissions...?

We economists usually recommend a carbon tax... We like that fact that the tax is explicit, not hidden, that it is efficient, minimizing collateral damage to the economy, and that it is effective, raising the price of greenhouse gas emissions and encouraging alternatives.

I kid my friends that "I formulated three carbon taxes for Bob Dole back in the early 1980's that are still in his filing cabinet." I'd be very surprised if the former Senate Finance Chair really kept them, but the fact that they were formulated at all shows that Senate leaders, then as now, were fully aware of of the advantages of a carbon tax. That none of those proposals saw the light of day is conclusive evidence that:

Political leaders don't want:

1. an explicit tax with their name on it;
2. an efficient tax that hurts their supporters; and
3. an effective tax may not encourage the alternatives they support. They prefer a hidden tax, which is why they are considering a cap-and-trade system of carbon allowances instead of a direct carbon tax.

They prefer a less efficient tax, which reduces the impact on the worst greenhouse gas emitters and spreads it around on others.

They prefer a less effective tax, which allows them to pick which alternatives to support and to pick which impacted Americans to compensate.

President Bush listed the objections quite well yesterday in his veto threat against the Lieberman-Warner cap-and-trade bill, S.3036, that the Senate is now debating. It would hurt consumers, shrink the economy, impose regulatory costs, implement a tax and spend system, expand entitlement spending, create new bureaucracies, create trade conflicts, and fail to achieve the bill's stated greenhouse gas emission goals. ...

There is only one thing that most senators agree upon in this debate: S.3036 will not pass this year. The bill will be debated for however long..., and then it will be shelved until next year. That's when we may enact a bill because all three presidential candidates have endorsed one version or another of carbon cap-and-trade.

Our political leaders will be watching the public and private reaction to this debate very carefully for signs of what changes they will need to make next year.

The primary change will be to water the bill down. No one wants to take credit for raising gas prices by 53 cents and electricity prices by 44% by 2030 or to cut GDP by $2.8 trillion by 2050. The path to reduced greenhouse gas emissions in next year's bill will be slower than that which is proposed now. ...

Comments

[Chuck Roast]

Mark;

Thanks so much for initiating this discussion. At the risk of being derivitave, here are some comments…

1. cap-and-trade attacks only large stationary sources and ignores mobile (cars and trucks), off-road mobile (construction equipment, lawnmowers [big-ass source], etc. and area sources (generators, jet planes, locomotives, etc).
2. cap-and-trade requires an extensive tracking/administrative system with high transaction costs and may be difficult to police.
3. profits on the trading of emission credits go directly to improvements to the second-house-in-the-Hamptons and are not captured by those who are, shall we say, "externalized upon."
4. issues of equity are not addressed.

OK, hold your nose, but Mankiw has this one right. A carbon tax is the way to go. I agree that finding the right price signals is questionable, but in an economy dominated by monopolies and oligopolys - only someone completley out of touch would ask this question.

A carbon tax would (and why not) - to wit...
1. attack stationary, on-road mobile, off-road mobile and area (you can permit open-burning) sources,
2. is relatively simple to administer and has low transaction costs,
3. the carbon tax can be captured by the state and (in a Panglossian world!) used to subsidize green energy efforts, and
4. carbon taxes can be used to off-set impacts on the most economically vunerable in the population.

Whitehead and I have been around the block on this issue. He seems to be most annoyed that I hide behind a cut of meat rather than post my real name. Anyway, we had a civil dialogue, which we can continue here. Last I heard he agreed that my logic was reasonable, but a cap-and-trade could never happen so we were left with what we might call a Nash Equilibrium – the second best (or what I would call s**t ass solution).

“Fire away mateys!”

[Stephen Gordon]

Gaah! Now you tell me about the post at Environmental Economics!

[anne]

"Carbon taxes can be used to off-set impacts on the most economically vunerable in the population."

Care to explain, like, how? Not theoretically, but in a way that is politically viable here. And, why are industry mandates not acceptable or actively being considered or are they?

[save_the_rustbelt]

To borrow a phrase from an economist friend of mine:

We are presenting our theories as facts, when in fact they are still just theories.

No one knows how or if any of this will work.

[jalrin]

Carbon permits can easily regulate mobile sources simply by requiring that refiners and importers of transportation fuel have permits for the fuel they sell to the mobile users.

Permits are better than carbon taxes in that they ensure that the targets are met because you do not have to guess the correct tax amount to secure the required reduction in emissions.

[Chuck Roast]

jalrin
That sounds reasonable, but the sale of transportation fuel does not constitute a carbon emission - or a NOX emission, or a CO emission or any other kind of emission.
What you are talking about sounds like a value added tax.
This "permit system" (assuming that there were costs associated with it) would inform Mark's demand curve above, but I can't see how it would fit in with emission cap-and-trade system and inform emission targets.

[Peter]

It is difficult to know where to begin in responding to this post -- it is so far off the Mark (so to speak). I have been blogging profusely on the topic (at EconoSpeak), including three posts in recent days, so folks can glide over there to get more detail. Let me just say:

1. Yes, in a world of certainty, and with 100% auction of permits, a cap equals a tax. But under uncertainty, as was first demonstrated 35 years ago by Martin Weitzman, it all depends on whether you want to put the risk on prices or emissions. If you think, as I do, that the monster risks are on the side of not facing up to the challenge of climate change, you will be for a cap.

2. Permits can and should be issued as upstream as possible, where carbon fuels enter the economy, not where they are combusted. All moralistic inclinations ("punishing" the evildoers with big carbon footprints) are misguided and counterproductive. Let the market system do its job, constrained by the cap. And the more upstream you cap, the more flexibility you allow for consumers and businesses to make efficient adjustments.

3. All permits should be auctioned and the proceeds rebated to households. This protects the real incomes of the public, enables policy sustainability and has the potential to achieve a fair amount of progressive redistribution, without playing favorites in any way. (An equal lump sum would benefit households with below-average direct and indirect carbon consumption, which is disproportionately low income.)

4. The political economy issues have to do with rent-seeking and unwise attempts by environmentalists to buy off business with special favors -- sector-specific increases in permits, giveaways, profitable but counterproductive offsets, etc. Economists should rally behind a policy of holding the line against these sorts of things.

[Chuck Roast]

Mark:
Thanks for the Pete Davis addendum.
In my voluminous discussions on this issue, it doesn't take long for participants to get where he is.
But, the huge smoke screen supplied by the official propaganda organs, "think" tanks, astroturf mouthpieces, corporate boot-lickers and assorted ruling elite flacks won't allow this dialogue to occur. It's a shame we are left with discredited clowns like Freidman and Samuelson to support the more economically efficient and socially equitable position.
Maybe you can help change that.

[Bruce Wilder]

I don't understand Pete Davis' argument about cap-and-trade being "invisible". How is it "invisible"? If anything, it seems highly visible. And, carbon taxes -- if they are just surcharges on fuels (are they? I'm not clear on this) -- would be relatively invisible.

The transaction cost/infrastructure argument would be a good one, if we did not, in fact, need that regulatory infrastructure. But, we do need the regulatory infrastructure to monitor the quantity of carbon emissions from various sources and the impact on the environment. Cap-and-trade involves some useful institution building, and because cap-and-trade makes the limits on total emissions visible in political headlines, it provides some institutional inoculation against special interest manipulation.

Speaking of special interest manipulation, how would cap-and-trade or carbon taxes apply to animal husbandry?

Growing animals for meat, dairy, eggs, etc. ranks up there with power generation and transportation as a leading source of greenhouse gases. How is either regime going to adapted to the farm?

[anne]

I would like to have an estimate of the extent of energy expenditure by the military and the extent of military energy expenditure in Iraq. Also, how energy intensive is air travel?

[a student of economics]

Peter @11:57 AM has it right.

We don't know in advance what the market price will be for a given carbon cap or conversely, exactly how much carbon will be reduced for a given carbon tax. Hence, it does matter which one you set.

I could see arguments for a hybrid system, e.g. set a cap but allow additional purchases from the government at a pre-set high price and/or guarantee sales to the government at a pre-set low price. This creates a safety valve if we guess wildly wrong about the costs of reducing CO2.

Of course, this is a second order effect compared to the question of what happens to the revenues from either the cap and trade or the carbon tax. If they are given to the polluters or other interests with political power, that's very different from using the revenues for general tax reduction or general government spending.

[Alex]

Regarding Chuck Roast's comment, I am generally confounded by a lack of evidence to his claims.

"1. cap-and-trade attacks only large stationary sources and ignores mobile (cars and trucks), off-road mobile (construction equipment, lawnmowers [big-ass source], etc. and area sources (generators, jet planes, locomotives, etc)."

This assumption is mistaken. Cap-and-trade is a policy tool that can be applied to any sector of the economy. It just so happens that the current forms of cap-and-trade in the EU-ETS and the US-based Regional Greenhouse Gas Initiative (RGGI) only address the stationary sources. Current legislation in California associated with the Western States Initiative includes provisions for coverage of the transportation sector, for example.

"2. cap-and-trade requires an extensive tracking/administrative system with high transaction costs and may be difficult to police."

The U.S. EPA already tracks emissions data and administers a variety of permitting programs in regards to those emissions.

"3. profits on the trading of emission credits go directly to improvements to the second-house-in-the-Hamptons and are not captured by those who are, shall we say, "externalized upon.""

This characterization is again misplaced. Cap-and-trade creates incentives for enterprises to reduce their emissions. Thus, profits will go to those who reduce the most at the lowest cost. A more appropriate critique may be levied against the distribution of emissions allowances. Allowance give-aways could be understood as a transfer of wealth from the government to enterprise. Thus, I would argue in favor of auctioned allowances. RGGI will proceed with its first auction on September 10.

Regarding the group referred to as "externalized upon", I am confused as to what this means. The general notion of any Climate Change legislation to to internalize the environmental costs not captured in the economy. For too long, those costs have grown unchecked. Now, as a society, we choose to assign value to those costs. The result is a benefit to society because the costs (emissions) will decrease when appropriate incentives are in place. Thus, society at-large will benefit once those costs are internalized and slowly reduced.

"4. issues of equity are not addressed."

Perhaps we should recall the learn the lesson taught to youngsters that life is not meant to be fair. Perhaps we should also recall the lesson taught to all students of policy - there are inevitably winners and losers associated with any policy decision.

[Chuck Roast]

Alex:
You say that my assumption about cap-and-trade attacking only stationary sources is “mistaken”. You then go on to say that this is simply “the current form of cap-and-trade” – verifying my position. Continuing, you say that the Western States Initiative “…includes provisions for the coverage of the transportation sector”. You give no examples – exactly what you accused me of doing. I’m curious how transport emissions can be capped and traded. It’s almost a contradiction in terms.
Indeed, the EPA does have an extensive emissions inventory of attainment and nonattainment areas throughout the US for all four emission sources. This makes it relatively easy to devise a cap-and-trade system for stationary sources like refineries and power plants. However, merely because the local air agency has a good understanding of mobile on-road, mobile off-road and area sources does not mean that they lend themselves to cap-and-trade.
For the most part, I agree with your third point regarding the auctioning of permits. But, recall what Peter says about “rent-seeking behavior.” A cap-and-trade is afterall, a tax by another means. I recommend that you go to the Resources for the Future website for all you need to know about the people and institutions that support and fund a cap-and-trade regime. We can expect the quality of the air to improve marginally for all, and it will be most beneficial commodities traders and corporate managers who will pass the cost along the same way they would when they put a costly electro-static precipitator in the stack to reduce emissions.
Regarding your “winner-loser” proposition – that would more commonly be called claptrap BS. If we had a carbon tax, the state could capture the income stream and transfer a portion to those who for example are in the lowest income strata and are subject to the Earned Income Tax Credit. They could be taxed at a lower rate to help off-set the costs of electricity, heating oil and gasoline or they could be rebated a tax credit.

[JeffF]

"jalrin
That sounds reasonable, but the sale of transportation fuel does not constitute a carbon emission - or a NOX emission, or a CO emission or any other kind of emission."

It can be safely assumed that fuels will be used, so the carbon in them will be emitted.

A carbon tax could also be written to only cover stationary sources, so this is again not a difference between them.

In fact a carbon tax would almost certainly be implemented as a tax on fuel (either at the time of production or at sale) because measuring the emissions of each tiny fuel burning source would be far more costly than simply weighing the fuel and multiplying that weight by the known C02 emission per weight.

[JeffF]

Oh, and I happen not to care much which policy is implemented, each seems to have a few minor advantages over the other. I just hate seeing the terribly bad arguments the cap & trade hater tax supporters use over and over.

[save_the_rustbelt]

I would like to have an estimate of the extent of energy expenditure by the military and the extent of military energy expenditure in Iraq.

Anne:

I seem to remember a major media source doing a story in the past month or so.

If my grandpa brain kicks in I might remember where......

[Bruce Wilder]

If Cap-and-Trade makes a lot of sense for stationary sources, what's wrong with implementing it for stationary sources, and using other strategies for automobiles and cows and so on???

[jalrin]

I guess I was not clear earlier about how cap and trade would work for mobile sources. The key is to require that a wholesaler or other distributor who provides the fuel whose combustion creates the emission is treated as having emitted emissions for any fuel they sell into the retail/end user market. The result is that you can now treat automible emissions as being a stationary source of emissions emitted by the distributor/refiner who provided the fuel to the gas station and bring them under the cap and trade system that way.

[Bruce Wilder]

Turning cap-and-trade into a fuel tax for cars and trucks doesn't bring anything under cap-and-trade. It introduces a fuel tax, where cap-and-trade doesn't work.

And, I'll ask again: what do you do about cows?

[JV]

Ahhh, Carbon trading. Probably the most ingenious tax that has ever been invented and only second to the income tax in that.

Taxing the weather and linking it to the human sin of consumption of the most common form of energy use worldwide is brilliant. Energy use that will continue to grow across the globe for decades at least. Governments at all levels and in all locations around the world can tax everyone everywhere. You don’t even have to call it a tax! No preconceived notions of a tax cut or a tax increase to being out existing foes to even resist it.

It is a nominal cost to administer: forms and codes like the income tax. It always produces positive results because there are no repeatable verifiable analyses using objective data that provide any quantifiable metrics of carbon damage to the weather whatsoever to worry about. You never have to test your predictions and prove them. You just have to keep convincing taxpayers that it is a matter of faith, not science. If it gets warmer the tax should be higher and if it gets cooler the tax is working and increasing it will help more. It will never be juusst right.

Politicians can’t loose because they can’t really cause any problems, other than economic contraction, by fooling with it too much. Local and regional governments can also use it like local income and property taxes. International governments can use it to limit more successful competitors. Aid agencies can extract monies from it without calling it “foreign aid.” It is “offsets” after all. All the lawyers and economists and study makers win because they can charge to tinker with, study, and administer the tax. Nobody looses.

Just have faith, we are the government and we are here to help.

[JeffF]

Yep, and you would do the carbon tax in exactly the same way.

Under a carbon tax there isn't going to be a little box on your car's tail pipe sampling your exhaust to figure out how much CO2 is coming out, it will be somehow worked into the cost of fuel. The absolute last place where such a tax would be applied is at the gas pump, and the main reason it would be done so late would be to exempt a bunch of people who buy gas in other ways (my uncle buys gas for his farm without paying much gas tax on it and he is not supposed to put that gas in his car).

It isn't just mobile sources, by the way, working the tax into the cost of fuel seems generally the easiest way to do it for fuels however they are to be used. If we do work it into fuels really not that many people or companies have to worry about the carbon taxes or permits at all, and most of them are already under environmental regulations. In my mind it pretty much comes down to fuel producers, some other heavy industries, and perhaps agriculture and land clearance. Pretty much everybody else emits C02 by burning fuel.

[JeffF]

" Bruce Wilder says...

Turning cap-and-trade into a fuel tax for cars and trucks doesn't bring anything under cap-and-trade. It introduces a fuel tax, where cap-and-trade doesn't work.

And, I'll ask again: what do you do about cows?"

To the fuel user they don't look much different. The carbon emission just becomes a cost that is built into the fuel, just like the labor it took to refine it, or the property taxes of the gas station. The point is most people don't directly deal with either a carbon tax or a cap & trade system. It just doesn't make sense to have every individual directly paying the tax or buying credits.

Now cows. Well the worrying cow emission is methane, i believe, and methane is a stronger greenhouse gas than CO2, though emitted by our civilization in much smaller quantities. I suppose that after getting a handle on CO2 it might make sense to think about using whatever system worked on CO2 on methane, and cows would fall under that system. It could be desirable to generalize the CO2 system into a "greenhouse gas units" system so methane and CO2 emissions could be traded off against each other directly.

[JeffF]

"It could be desirable to generalize the CO2 system into a "greenhouse gas units" system so methane and CO2 emissions could be traded off against each other directly."

Or to include both in the "CO2 equivalent greenhouse gas tax".

[Bruce Wilder]

JeffF, one of my little obsessions is control, as in technical, enginneering and management control of processes. If a tax is going to work to reduce emissions, it will work by motivating control. Aligning incentives with feedback and opportunities to take effective action, have to considered.

We mandated catalytic converters on autos. We could have just raised the fuel tax, I suppose, but we didn't.

The big argument for taxing emissions, per se, or for cap-and-trade, is that it creates the incentives for organizations to go out and find ways to invent and impose effective technical or managerial control schemes. In this respect, rent-seeking is a feature, not a bug. Rent-seeking is a good thing. I don't mean currying favor with government, of course, but rents are a key to making the large sunk cost investments necessary to develop and put into place control. It is that relation of rents to innovation that make cap-and-trade attractive for stationary sources, particularly power generation.

It is not clear to me that cap-and-trade can be adapted to spur innovation in quite the same way outside of the stationary source / power generation arena.

[JeffF]

I think the catalytic converter case is very different from the CO2 case in ways very important to policy.

1) Catalytic converters reduce nox, hydrocarbon, etc emissions something like 99% (as I recall) for a fixed cost per vehicle of, I think, a few hundred dollars. There is no similar solution for carbon emissions. 5 or 10% improvements are much more common. When a magic bullet like a catalytic converter is available simply requiring it makes good sense. Nobody was going to limit gasoline use to 1% of what it had been to get the same result.

2) The problem which Catalytic converters solve is far more localized than the greenhouse gas problem. Classical air pollution takes effect mainly on the scale of a city. Thus a global cap & trade, or tax system might not fix the problem at all. The pollution might be reduced in some areas and not others. The emissions are not as interchangeable because it matters far more when and where they happen. CO2 emissions cause problems globally, and as long as they happen on earth they are fully interchangeable even across a few years.

I don't think rent seeking is the right word. Rent seeking is a danger of bad cap & trade. Where current polluters are given property rights over the right to pollute, and extract revenue solely because they used to pollute more. What we do want is to make "right to emit co2" a limited resource. We want to manage it like a fishery, or an aquifer.

[JeffF]

Oh, another difference with classical air pollution from cars: It is harder to measure.

The amount of air pollution produced by a car is primarily related to the workings and condition of it's engine & pollution controls. An old beater even with pollution controls can easily be emitting 10x what a newer car does simply because it needs maintenance. Just look at how we do measure car emissions. You drive your car to some special facility where a refrigerator sized machine sniffs at it's exhaust for five or ten minutes.

That kind of monitoring works if there are few large sources, especially if their emissions are being monitored anyway for other things.

Compare that with the situation for CO2 where we know that all the fuel produced by the refinery will be burned into however much CO2 it burns into and we don't have to care how, when, or where it will be burned.

[Alex Tolley]

Bruce Wilder: And, I'll ask again: what do you do about cows?

Perhaps we should look at whether this matters. This site

shows various CH4 sources. Note that cow farts are only about 16% of the emissions. Mining is a bigger contributor, and rice farming just a little lower (yet we need rice farming and can't easily give it up). Note the size of the contribution from wetlands - and I don't think we want to drain any more, especially in the developed world.

[Roast]

Jalrin
I’m still trying to figure out what you are talking about here. The distributor/refiner is not “emitting” carbon. He is selling a commodity that contains carbon as a product of combustion. OK.
Are you capping the sale of the commodity based upon the credits that he controls? If so, this will drive the price of petroleum product up if demand exceeds supply.
Fine. But where are the carbon mitigation measures? Do people by more fuel efficient cars and houses? Is that the deal?
So, it is effectively a carbon tax – no? But without the same old rent seeking behavior by the trading class, and no possible chance of equity for the slobs.

Bruce:
See my last comments on “His Readers are now Dumber for his Efforts”

JeffF
You know just enough about this issue to be dangerous. Catalytic converters do not reduce NOX, they reduce HC and CO. And BTW, gasoline had to be improved substantially with their introduction because an excess of sulfur blew them up. SOX reduction - a side benefit.

All
EPA calculates a "potential to emit" on all stationary sources based upon their fuel type and mitigation technology. They also calculate "equivlants" for emissions of say toxics like benzene. Equivlants can be reasonably calculated for any pollutant based on fuel type and remediation strategy. Prolly more than you needed to know.

[JeffF]

Roast,

According to wikipedia there is a type of catalytic converter (called "two-way") which, as you suggest, mitigates only CO and hydrocarbons, but there is also another type of catalytic converter (called "three-way") which mitigates CO, NOx, and hydrocarbons. Before 1981 the US required the type you describe, after 1981 the type that reduce all three was required.

[gordon]

I'm worried by the CBPP statement (in the paper linked in the post) which says (in part): "Consumers would continue to face the effects of higher energy costs on their budgets while such programs [energy efficiency, mass transit etc.] ramped up. Even in the long-term, it is unlikely that one could provide enough assistance in the form of cost-effective energy efficiency interventions to offset most or all of low-income households’ loss in purchasing power due to higher energy prices. Consequently, while expanding energy efficiency programs is important and can help low-income households, it should be viewed as a supplement to a rebate-based approach, especially over the longer term. It does not obviate the need for consumer relief, particularly for people with low incomes.

This implies that, without Govt. assistance, there would be a continuing and irreversible drop in living standards for low-income households even if there is major investment in more carbon-efficient ways of doing things. I find this both surprising and alarming.

[paine]

"OK, hold your nose, but Mankiw has this one right..."

enough reason to stop dead in ones tracks

this very clever fire imp
looks for the "better "
way forward (or backward)
strictly from the plutocratic stand point

like a carnival sharpee
he works that intricate and feverish
diabalo's brain of his
often involving it
in hideously dry
and over long chains of deduction

but hell its all just
a walnut shell shuffle...
the ending is where he starts from
and that end
is always what's best for daddy big bucks

sure on occasion
he comes off like
he's found the cleverist
simplest
but still most innocent
most broadly benign most natural and rational
solution construction to any social task
but it only looks like that
crack the well covered hoodwinks
and its bogus venal purpose emerges...

till proven otherwise
i'll take the road to
a way up stream uncle permit auction
with a secondary market in permit trading

btw
this whole subject bored me
---i'm solid brown guys---
that is until i realized
its a proving ground
for many similar social market schemes

including the ultimo
cap and trade

the one that blocks wage price spirals

the price mark up cap and trade market
ala
lerners MAP

[paine]

"we do need the regulatory infrastructure to monitor the quantity of carbon emissions from various sources and the impact on the environment. Cap-and-trade involves some useful institution building, and because cap-and-trade makes the limits on total emissions visible in political headlines, it provides some institutional inoculation against special interest manipulation."

right on bruce

[paine]

it makes me dismal
to see such careful thought on this
green earth blue sky issue

compare it to
the primitive briar patch obfuscatory
spacey gooo goo
we all produce here
on the endemic
wage price spiral
i guess this cotrast
fits the point
the more central to the system
the attcked target
the more pathetic
the recognized legtimate
discuss-able methods of attack

[paine]

jv
i like your notion
of gubmint
its a coven of imps
building vast towers of paper shuffling mummery
extracting punitive taxes
and using the proceeds
to feed their idle "voters"
dole add-ictions
and
to build vast towers of paper shuffling mummery

their personal incentive ???

the ghastly sweet vapors
rising off
the steamin' dung heep
that is our national over soul

yup
they get high
on
hard working
rule following
regular guys' misery