Granby01033

He Who Must Be Read says the THE AMERICAN CLEAN ENERGY AND SECURITY ACT OF 2009 won’t be perfect. The Right Wing doesn’t like it, but neither do environmental purists. There are four parts to the bill penned by Henry Waxman (D-CA) and Ed Markey (D-MA), but Krugman talks about the more controversial measure to tackle climate change: cap and trade.

Cap and trade works with the federal government setting up a pollution limit. Polluters receive permits for a certain amount of pollution. Because there is a limit to pollution, and polluters can can buy or sell these permits, a market is created. A company that reduces its pollution can sell some of its pollution permission to another company, offsetting the costs of reduction and making a potential profit.

Al Gore has praised the bill, and plans to organize a grass-roots campaign on its behalf. A number of environmental organizations, ranging from the League of Conservation Voters to the Environmental Defense Fund, have also come out in strong support…

 

The legislation now on the table isn’t the bill we’d ideally want, but it’s the bill we can get — and it’s vastly better than no bill at all.

 

One objection — the claim that carbon taxes are better than cap and trade — is, in my view, just wrong. In principle, emission taxes and tradable emission permits are equally effective at limiting pollution. In practice, cap and trade has some major advantages, especially for achieving effective international cooperation.

 

Not to put too fine a point on it, think about how hard it would be to verify whether China was really implementing a promise to tax carbon emissions, as opposed to letting factory owners with the right connections off the hook. By contrast, it would be fairly easy to determine whether China was holding its total emissions below agreed-upon levels.

 

The more serious objection to Waxman-Markey is that it sets up a system under which many polluters wouldn’t have to pay for the right to emit greenhouse gases — they’d get their permits free. In particular, in the first years of the program’s operation more than a third of the allocation of emission permits would be handed over at no charge to the power industry.

 

Now, these handouts wouldn’t undermine the policy’s effectiveness. Even when polluters get free permits, they still have an incentive to reduce their emissions, so that they can sell their excess permits to someone else. That’s not just theory: allowances for sulfur dioxide emissions are allocated to electric utilities free of charge, yet the cap-and-trade system for SO2 has been highly successful at controlling acid rain.