Comments on: Carbon trading, windfalls, and consumers

By: Two American cap-and-trade plans » a sibilant intake of breath

Two American cap-and-trade plans » a sibilant intake of breath — Tue, 09 Sep 2008 11:28:39 +0000

[...] As described before, consumers experience price rises in either scenario. What differs is where the windfall accrues. Under an auctioning system, it ends up in the hands of government, which can use it to fund low-carbon investments or refund it to the population as a hole (as in a cap-and-dividend system). Under a free allocation system, it simply goes into the coffers of the biggest polluters. [...]

By: .

Mon, 28 Apr 2008 21:33:09 +0000

Economist Peter Dorman has a suggestion to clear up the confusion about free carbon permit allocation and windfall profits:

…I’m thinking of the decision to commit the WCI as a whole to auctioning only a portion, between 25 and 75%, of the carbon permits they intend to issue, distributing the rest gratis. Isn’t it generous to be handing out free money to the most polluting businesses?

Of course, it’s difficult for the general public to see just what’s going on. To remedy this, I propose the following: auction all the permits. Then take some of the money, between 75 and 25%, and deliver it to the doorstep of firms that emitted the most carbon in the past, preferably in suitcases with unmarked bills.

Maybe if you put the whole operation on YouTube people would get the point.

Nicely put, I thought.

By: tristan

tristan — Thu, 03 Apr 2008 03:36:51 +0000

I figured out what’s wrong in the initial analogy. You say that the prices of world series tickets are based in supply and demand. That’s actually wrong (prices arise out of supply and demand, but are not based in it), but just imagine it was right for the sake of argument. Whether or not the world series tickets are given away or sold in the first place affects the supply side. The world series is a bad example because its micro economic, while carbon credits have macro economic effects. The point is, charging for CCs in the first place takes money away from all industries, making them as a whole less profitable. This is in addition to the repairs they have to make to lower their emmisions. Both of these things are costs to the supply side, and will result in some firms closing down, reducing supply. Thus, macroeconomically, supply is reduced and prices go up by some amount if we institute carbon trading, and by that amount plus more if we charge for the credits.

By: Milan

Milan — Tue, 01 Apr 2008 23:21:50 +0000

Tristan,

I think jail time will probably be politically acceptable, for people who breach mandated emissions limits. We would jail people now for dumping toxic or radioactive waste.

What needs to change is the deadly seriousness with which people should think about GHG emissions.

By: tristan

tristan — Tue, 01 Apr 2008 22:37:00 +0000

“Under the incoming Canadian system, they would be prosecuted under the criminal code. I am not sure exactly what that entails.”

Likely nothing. Or fines. If anyone goes to jail, I won’t fly for a year.

By: alena prazak

alena prazak — Tue, 01 Apr 2008 21:14:19 +0000

This photo is really wonderful. It reminds me of the gas masks that we wore as small children in Czechoslovakia in anticipation of a US nuclear attack.

By: Milan

Milan — Tue, 01 Apr 2008 11:43:44 +0000

I can see a pretty big loophole in this system - what do you do when a company exceeds its emissions limit?

Under the incoming Canadian system, they would be prosecuted under the criminal code. I am not sure exactly what that entails.

By: Sarah

Sarah — Tue, 01 Apr 2008 06:46:37 +0000

I imagine you could fine them a lot, & that ultimately if the scale of violation were large enough and/or they were a repeat offender you would suspend or shut down their business. There is precedent for the government stepping in to halt a plant after a company has caused major environmental pollution problems.

By: tristan

tristan — Tue, 01 Apr 2008 06:37:08 +0000

I can see a pretty big loophole in this system - what do you do when a company exceeds its emissions limit? I mean, you can fine them, but unless you fine them infinite funds, there seems to be a chance that medium sized violations on the part of many companies will result in net emissions going up, not down.

By: Milan

Milan — Tue, 01 Apr 2008 03:06:58 +0000

EH,

It is barely modified. There was a slight levels adjustment, it was resized (not cropped), and a mild unsharp mask was applied.

I will lead you onto that rooftop sometime.

By: EH

EH — Mon, 31 Mar 2008 22:54:25 +0000

I love that photo! Was it Photoshopped to be much different from the original?

The colours are really crisp and complementary, and the way the fans are centred is great!

By: Sarah

Sarah — Mon, 31 Mar 2008 17:54:42 +0000

This is an interesting argument, & I see the logic re. scalpers. However, if a gradual reduction in CO2 is envisaged then there shouldn’t be sudden price hikes - after all, you wouldn’t make much cash as a scalper if there were only 2% fewer tickets than people who want them. Of course, some industries would be more affected than others - I presume the tar sands exploitation would get shut down quite quickly (presuming one also withdrew the subsidies) & people might be resentful about the continually rising costs of air travel.
One can also see how the extra tax revenue might prove useful - for instance to provide loans or grants to individuals and companies who install lower carbon technology early in the process (ie. they invest in expensive technology that makes a 20% cut in their CO2 in year one, but it would be scary to take out a huge loan and assume you could pay it off with the uncertain cost of carbon credit sales in future years, plus the credut markets might be all screwed up).