What exactly is tax policy? Well, it is not just a way to collect money to run government. It is a way of giving a kickback or punishment, or emplacing a control. The power of the purse. If something is unpopular (to an elected politician), let’s jack the taxes. If it is something they like, particularly for a campaign donor, let’s lower the taxes. Taxation policy gives tremendous power to politicians, which is why the person who chairs the House Ways and Means Committee is really one of the most powerful people in America.
Now it appears that carbon permits are going to provide the same kind of control
President Barack Obama was emphatic during his campaign and after his election: The best way to fight climate change is to cap carbon emissions and auction off tradable permits to emit carbon.
“If you’re giving away carbon permits for free, then basically you’re not really pricing the thing and it doesn’t work — or people can game the system in so many ways that it’s not creating the incentive structures that we’re looking for,” he told the Business Roundtable in March.
His budget director, Peter Orszag, was blunter: “If you didn’t auction the permit, it would represent the largest corporate welfare program that has ever been enacted in the history of the United States,” he told the House Budget Committee in March.
This past week, Rep. Henry Waxman’s House Energy and Commerce Committee passed a climate-change bill that gives away 85% of the emission permits until 2026. President Obama applauded, calling the bill “a historic leap.”
Huh?
Huh indeed. Let’s look at the breakdown
Which companies and individuals will get the permits? Could they be ones who are favorites of elected officials? Might one coal plant get one, because they were a big campaign donor, while another gets shafted? Think about the way tax policy has been used (let’s be honest, both Party’s do it) and is being used. Kickbacks, punishments, control.
As Europe’s experiment with cap-and-trade demonstrated, giving away permits can fatten polluters’ profits without protecting consumers from higher prices.
“How one gives them away, what restrictions are on that gift, makes all the difference in the world for the economic effects,” said Douglas Elmendorf, director of the Congressional Budget Office. In other words, Congress will put strings on the gifts. And then things get complicated.
On the flip side, how one gives them away can determine which companies and economic sectors thrive, and which ones suffer and potentially die.
