"With a full auction, the permits would end up with companies willing to make the highest bids. Presumably, these would be the most efficient companies, the ones able to produce the most energy (and profits) for a given amount of greenhouse-gas pollution."

When an economist wants to leave things to the market and they say this will "presumably" lead to some good benefit know, 100% for certain, that they are full of shit.

100%.

Obama starts to fade... Pulls a Kerry, even a Gore. Liberal activists lose interest in a party of the rich run by Wall Street and oil pipeline interventionists.

2008--end of Democratic Party as we know it.

2009 new party forms to take on Republicans.

From the looks of it, the new party, as yet unnamed, will not be another party of the rich. Rule of Rich begins to fade in US as the truly rich move to China.

US in 2010 becomes a second tier power--emerges as happy and content Scandinavian country.

First, Obama is serious about a cap-and-trade plan. McCain isn't. Second, Obama puts in place cap levels that are actually meaningful attempts to reduce greenhouse gases — i.e., to actually address the problem at hand.

Kevin, it is my sincerest hope not only that Obama makes his commitment to a cap and trade plan to reduce carbon emissions and other actions to combat "global climate change" his top domestic agenda item, but also that every Democratic Congressional candidate pledge to enact Obama's plan within the first 100 days of the new Congress. Nothing would be faster in changing Nancy Pelosi's title from Speaker to Minority Leader.

I'm not a fan of cap and trade. The amount of bureaucracy and regulation needed to enforce cap and trade is too significant a drawback. A straight out carbon tax is much more appealing.

It means recognizing both the efficiencies of markets as well as the instances where they fail, Orwell. That is not a difficult concept.

"With a full auction, the permits would end up with companies willing to make the highest bids. Presumably, these would be the most efficient companies, the ones able to produce the most energy (and profits) for a given amount of greenhouse-gas pollution."

Wouldn't the result be the opposite? The most eco-friendly companies (or those where it's cheap to become eco-friendly) would be willing to bid the least because their marginal cost to reduce pollution is low. The companies that would pay the most for permits are those that face a high marginal cost of abating pollution. If cap'n trade worked the way Leonhardt suggests it wouldn't be a very useful program, since the efficient companies aren't the ones we want to go after.

A carbon tax would be far preferable to a cap-and-trade system. For one thing it is easier and less costly to implement and maintain, and for another it is more difficult to cheat.

And as far as "market based" solutions go, it is a more straightforward way to force the market to internalize the enormous, currently "externalized", costs of burning fossil fuels. When all the costs of fossil fuels -- and nuclear power -- are internalized by markets, then solar, wind, geothermal, biomass and other forms of clean renewable energy generation are already cheaper than fossil fuels and nuclear.

I agree with Chicounsel on this much: it is my sincerest hope that President Obama and a strengthened Democratic majority in both houses of Congress will make it a top priority for their first 100 days to pass comprehensive legislation to address global warming, and to move the USA towards a new energy economy based on harvesting clean, abundant, free solar and wind energy.

The survival of human civilization depends on it.

What impressed me most about the Obama economic proposals I'd seen was, his ideas to reform the Credit Card industry. Finally, someone was e.g. seriously proposing (it better be!) to legally require that customers can allocate payments to the account at the highest interest rate, etc. BHO and his supporters should push this everywhere. This is also being roughly paralleled by some Democratic initiatives and I'd like to hear more about those too.

Well, if "Mr. MBNA" (Joe Biden) gets the Veep slot, just remember that
1. He would be VP.
2. Not running for Senate means JB doesn't need to focus on local interest groups.

chicounsel i hope Obama does at least what you said otherwise I'll enjoy watching you fry on a burned out cinder of a planet.

chicounsel i hope Obama does at least what you said otherwise I'll enjoy watching you fry on a burned out cinder of a planet.

Posted by: Gandalf on August 21, 2008 at 3:49 PM

And just where will be watching me fry? Going to stay with the Hobbits on Middle Earth? lol

Good lord! SecAn agrees with Chicocounsel on at least one thing? Head for the hills folks, the end of the world has arrived!

Cap and trade hasn't worked to reduce carbon emissions in Europe and it won't work here. All the pipe dreams in the world won't lead to an easy solution to sharply decrease emissions or our dependency on carbon fuels, not cap and trade and not alternatives. Without them the economy won't grow and our way of life can't be sustained. That's the simple truth. Eventually there will be real technological breakthroughs that will result in the practical and widespread use of hydrogen perhaps. wind, nuclear and solar will continue to grow, though more slowly than many expect. But for at least the next 10-20 years, probably longer, we will depend on carbon fuels. Just no getting around it.

damn, kinda weird that you're leaving. Congratulations, farewell, and good luck. I'll follow you over there.

VOTE DIGBY-CLARK-2008---VOTE THE INTERNET intellegent YET having backbone.

"The auctions would have another big advantage too. They would raise billions of dollars for the government, money that could then be returned to taxpayers to offset the higher energy prices created by the emissions cap."

Money returned to the taxpayers? I'm a Democrat, and I'm not holding my breath for that.

The *cost* of the permits will simply be passed on to the taxpayers, unless the "mindful friendliness" of corporations reverses a centuries-old tradition, or Hell freezes over, whichever comes first.

They do not auction 100% of the permits, they auction off 62%, the other 38% will be passed out by Barney Frank.

Further, part of the auction income will ho toward subsidizing the emission permits for the 38%.

Goolsbee knows about this problem, a paper was published at an environmental conference, a paper he must have looked over. The paper showed just this problem, the intended (not unintended) bias to subsidize the energy inefficient portion of government.

Even Brad DeLong knows enough to avoid making this mistake, Goolsbee does not. What does that tell you?

Matt,
Goolsbee's cv is here : http://faculty.chicagogsb.edu/austan.goolsbee/website/research/vitae.htm.

As you can see, he has no prior experience in the cap and trade arena. Mostly on effect of internet on economy and some analysis of increasing tax rates on top 1% CEO's. For pete's sake he is just 13 years out from getting his PhD.

So I wouldn't take his assertions very seriously. Remember this is the guy who nudge nudge, wink winked Canada on Obama's "Let's gut NAFTA" position in the spring. Course now we know that was just all overheated campaign rhetoric.

Unfortunately, thoughtful discussions of complex issues don't sway large numbers of voters the way simple-minded, idealogically-based, sound bites do... i.e. "It's YOUR money!" Frankly, Obama had me at, "there are certain things the market doesn’t automatically do," but this is too difficult to explain to voters. I'll be very curious to see how Obama presents his economic ideas to the voters.