Monday, September 28, 2009

Costs of cap and trade, a few links

I'm not super current on the details of the Waxman-Markey bill.  But here are a few must read links:

CBO analysis of costs (CBO is reasonably objective, in my view)
Heritage foundation analysis (what you can always expect from Heritage)
EPA analysis
Review of McKinsey research
Krugman:  It's easy being green
Krugman: Pigou, Glenn Beck, and the false case against cap-and-trade
Krugman: The textbook economics of cap-and-trade
A series of nice posts by Robert Stavins

Something I really need to understand better:  how emissions permits allocated to electricity companies are passed through to consumers in the form of lower electricity prices.  This doesn't seem to get all the incentives right.  I really wish (hope?) they somehow impose multi-tiered pricing wherein the marginal price increases sharply with level of use.  This could keep the burden low while providing strong incentives for energy efficiency.  
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1 comment:

  1. ROctober 8, 2009 at 8:19 PM

    One elegant solution (at least in theory) is to rebate a lump sum, rather than lower prices. Revenue neutrality (or I guess we care about its mirror for consumers) is preserved, without blunting the price signal incentives for efficiency.

    As far as I know this is still on the table, and obviously energy efficiency advocates are pushing for it.

    Mankiw seems to ignore this simple trick in his criticisms; Felix Salmon points out that it's not perfect and inequalities will inevitably arise, but it still seems like a simple and pragmatic solution.

    http://peopleandresources.blogspot.com/2009/10/feature-or-bug.html

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