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.  


  1. 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.


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