Divvying up the booty

The Senate Finance Committee held a hearing Tuesday on how to divvy up the booty (that is, allocate the ration coupons) under a cap-and-trade system.  John Stephenson, testifying on behalf of the U. S. Government Accountability Office, noted the obvious: cap-and-trade works by increasing energy prices and that poor people feel the most pain because they spend a higher proportion of their incomes on energy than wealthier people.  Stephenson testified: “According to economic literature, in the absence of compensatory measures by the government, a cap-and-trade program could have a disproportionate impact on low-income households, since they generally spend a higher percentage of their income on energy and energy-intensive goods and services than do higher-income households.”

On the subject of giving away the ration coupons to utilities and other emitters in order to minimize price increases, Stephenson was very clear: “Furthermore, attempts to keep energy prices low could increase the cost of the program to the economy. Rising prices for energy and energy-intensive goods are critical to the success of the program, because these ‘price signals’ create incentives for both covered entities and consumers to conserve energy, and thereby reduce emissions of greenhouse gases. To the extent that price signals are not preserved, fewer households and businesses will change their behavior in response to these signals. This could reduce the economic efficiency of a cap-and-trade program, since some of the less costly emissions reduction opportunities would be foregone.”

Alan D. Viard of the American Enterprise Institute explained exactly where the proceeds of free ration coupons would go: “Free allocation of cap-and-trade allowances to firms in unregulated markets is equivalent to imposing a carbon tax while using the revenue to make transfer payments to stockholders.”

Nathaniel O. Keohane testified on behalf of the Environmental Defense Fund, a front group for big corporations hoping to get rich off cap-and-trade legislation.  He said that the Waxman-Markey bill as passed by the House is an excellent start that the Senate only needs to improve around the edges.  Yes, indeed, that’s why every big company and industry is now lining up at the Senate trough oinking for more free ration coupons.