House Reaches Deal on Cap-and-Trade

June 24, 2009

So the Wall Street Journal is reporting that the House has reached an agreement on a cap-and-trade bill and will vote on it Friday. A few comments:

Many critics of the bill (mostly Republicans) are saying this will kill the economy. The problem with this view is that if the negative externality from greenhouse gas emissions is truly there and sizeable, then a cap-and-trade program would improve economic well-being. It may lower GDP due to the fact that its measure doesn’t include environmental quality, but it would increase economic well-being for the nation as a whole. (Obviously, it will have its costs in the form of higher energy prices, but that’s intentional.) The true question for critics is whether or not global warming exists. They rarely address that question, which is really the most important one. It sounds better to use Armageddon talk of “this will kill the economy.” And speaking of nice-sounding phrases that mean nothing…

It wouldn’t improve economic well-being for the ridiculous reason Obama says, which is that this will create “green jobs.” If we could save the planet by enacting a policy that didn’t require any jobs, that would be better. Bragging about how many new jobs will be needed is actually an admission that it will use up society’s resources to “save the planet.” It’s a cost; not a benefit. We could help save the environment and create a lot of jobs in the process by banning farm machinery, forcing farmers to hire people to do everything in the field by hand. I guess Obama would call those “green jobs.”

Finally, if you are going to force emitters to purchase permits, why is this bill giving so many of them away (82 percent of them)? Obama supposedly needs money to pay for healthcare. Instead of enacting some distortionary tax like a VAT or a ridiculous tax like a soda tax, why not give fewer emission permits away?

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