Friday, November 02, 2007

Congressional Budget Office: free carbon credits=windfall polluter profits, and pain for consumers

Very perceptive testimony to Congress yesterday by the Congressional Budget Office.

http://online.wsj.com/public/resources/documents/CBO-testimony1101.pdf

It makes for very interesting reading given it was presented at the very time the Senate Lieberman subcommittee was racing to adopt a plan that would give many billions of dollars away to the biggest polluters. (Perhaps the appropriate response to the latter should be the sound of one hand clapping.)

The CBO confirms what we have been saying: that giving free emission credits to coal-burning companies or other industries could result in “windfall profits” – and added pain for consumers, especially those “at the lower end of the income scale.”

In other words, giving away free emission credits helps big business and hurts the hapless consumer.

The macroeconomic costs of giving emissions away could be more than double the cost of auctioning them, according to the CBO.

CBO also noted that a carbon tax would likely be a more efficient way to deal with the global warming problem (and CBO does believe it is a very large problem that should be dealt with) than the more politically fashionable cap-and-trade approach.

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