Energy Ration Coupons Cost A Mint – Even When They’re Given Away for “Free”

by Chris Horner on September 18, 2009

My former CEI colleague and now academic Jonathan Adler has an unfortunate post over on The Volokh Conspiracy manifesting a fundamental misunderstanding of how cap-and-trade is expected to work, how it has worked in Europe, and what the documents, received under FOIA from the Department of Treasury and causing his fellow academics so much angst, represent.

You can read Jonathan’s frustration for yourself (and the slightly better informed commenters’ thoughts, as well) here.

I have already addressed the 100% auctioning is irrelevant can’t we move on that’s old news line of, for lack of a better word, argumentation. The same revenue projections from 100% auctioning made by the administration in February were in the administration’s mid-session review published about three weeks ago: that is, it remains 100% the administration’s policy to 100% auction. Ok, the House passed a bill. That wasn’t the subject of the Treasury memos setting forth the administration’s expectations. Nice try.

Well, not that great, actually. That bill, Waxman-Markey may not arrange to sell 100% of the ration coupons — when it kicks in, it is three-fourths, not the 15% you are being distracted with — but it does require 100% of them be bought. That’s a distinction without a difference to the people who have to buy them, and to the consumer/ratepayer/taxpayer. The distinction is that the state gives away a quarter of the ration coupons to folks who are not covered by the law and have no use for them but to sell them to poor saps who are covered by the law. To the people that matter, trust me, that makes no difference. It is a phony argument at worst and a distraction at best.

Nor does it make any difference even if 100% were given away. At least, if you take Obama’s budget director at his word. You can read current OMB director and former CBO director Peter Orszag saying just that — on numerous occasions in several slightly different ways here among numerous other places:

Under a cap-and-trade program, firms would not ultimately bear most of the costs of the allowances but instead would pass them along to their customers in the form of higher prices. Such price increases would stem from the restriction on emissions and would occur regardless of whether the government sold emission allowances or gave them away

Also, in Europe, we see that the ration coupons were given away for free, just as Waxman-Markey — again, not the focus of the Treasury documents– largely does as well for the scheme’s first few years. In Europe, prices of electricity and that which has electricity or energy embedded in it (everything) went up. Period. To claim, as Waxman-Markey proponents do, that they’ll just avoid Europe’s experience by telling local distribution companies to make sure the cost is not passed on to the ratepayer though emissions (energy use) must go down, flies in the face of practice and economic theory. This later case is made in a forthcoming paper, which to be thorough and fair I will note here, referencing this post.

Jonathan has waded in on matters on the side of the greens before and I have always enjoyed how the repartee ends up, so I welcome this foray, too. The more opportunity we have to correct silly distractions, misstatements and misunderstandings, the better.

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