Would Obama Support Cap-and-Trade If Global Warming Wasn’t a Problem?

June 28, 2009

So the House of Represenatives has passed the Waxman-Markey cap-and-trade bill, and the issue now heads to the Senate. In his weekly address on Saturday, Pres. Obama urged the Senate to pass the measure. What was his main selling point? Green jobs.

It’s nonsense to consider these new “green” jobs as a benefit of cap-and-trade. Not only do most of the green jobs just come at the expense of jobs in the “dirty” job sector, this whole talk of “jobs” is a red herring.

Using Obama’s argument, if government heavily taxed coffee, we could not only reduce our dependence on foreign coffee beans, we would create more jobs in industries whose products were substitutes for coffee (say milk or orange juice). Imagine all the new dairy farmers there would be or citrus growers out there working to meet the increased demand for milk and orange juice.

The reality is that cap-and-trade can really only be beneficial if greenhouse gas emissions are truly a negative externality going forward (i.e. essentially whether global warming exists or not).

Is cap-and-trade a tax? As an economist, I’d say yes. If you don’t want to call it a “tax” and want to get into semantics or legal mumbo jumbo over what is a tax, we can argue that until we’re blue in the face (and that is what the talking head shows have mostly done). But it is essentially equivalent to a tax in terms of its economic effects.

So cap-and-trade is economically equivalent to a tax, and it can be a beneficial one from society’s perspective. But its only real purpose from the perspective of making sound public policy should be to reduce any harm from climate change. This morning on ABC’s This Week, liberal talk show host and Georgetown professor Michael Eric Dyson actually put the issue in its proper perspective:

DYSON: The point is, you’re paying a tax, however, on the preservation — I hate to sound cosmic here, but on the preservation of the environment. I’m sure that Chancellor Merkel and Al Gore are toasting each other this morning because — this doesn’t go nearly far enough, I disagree with Warren Buffett. I mean, I agree with him that it’s about a tax..


STEPHANOPOULOS: … a tax, but you’re saying it’s a tax worth paying…


DYSON: Let’s not lie. Let’s not lie about it. It’s a tax. It’s worth paying. It’s the environment. It’s about these carbon dioxide emissions that we’ve been trying to deal with for years and years and years.

The true benefit from a cap-and-trade system is the value to society of an improved environment. The relevant questions for policymakers are thereby whether global warming exists, what its harms are, and the impact that greenhouse gas emissions have on climate change. How many new jobs will be “created” from our economy having to make tax-induced adjustments is not one such relevant question, despite what you may hear from renewable energy lobbyists or politicians like our president.



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