Friday, April 11, 2008

Congressional Budget Office: free carbon permits is like giving out cash

Budgetary effects of Lieberman-Warner climate bill
April 10th, 2008

CBO has issued a cost estimate of S. 2191, the America’s Climate Security Act of 2007, as ordered reported by the Senate Committee on Environment and Public Works in December 2007. We’ve also issued a cost estimate on a slightly amended version of the legislation that was transmitted to us on April 9, 2008...

A second scoring question involved the emissions allowances that are given away at no charge. In CBO’s view, these should also be recorded in the budget as revenues and outlays. The government is essential to the existence of the allowances and is responsible for their readily realizable monetary value through its enforcement of the cap on emissions. The allowances would trade in a liquid secondary market since firms or households could buy and sell them, and thus they would be similar to cash. CBO estimates that the value of the market created by the major cap-and-trade program would be large, exceeding $100 billion in 2012. Therefore, CBO considers the distribution of such allowances at no charge to be functionally equivalent to distributing cash.

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