Thursday, February 26, 2009

A Simple Little Cap-and-Trade Tale

china_pollution In a story about President Obama’s budget priorities, this popped out at us:

As for cap-and-trade, the official said the administration believes it will generate enough money to fund a variety of priorities, including investments in renewable energy and rebates for vulnerable consumers who may struggle to pay higher energy bills if utilities pass along the cost to consumers. Obama also wants to use the money to cover the cost of extending his signature Making Work Pay tax credit, worth up to $800 a year for working families. That credit, which will cost $66 billion next year, was enacted in the stimulus package, but is set to expire at the end of 2010.

What surprised us is that the administration believes cap-and-trade will pass, get set up, work as expected, and start generating revenue in time to issue tax credits for 2011. Given how long it takes to get a program into gear – establishing an office, hiring a staff, identifying the players in a cap-and-trade regime, setting up the mechanism to manage the new marketplace – this is remarkably optimistic. (And responsible, too: offering rebates to those who will bend under higher energy bills seems exactly right.)

If Energy sets up something similar to Europe – and makes it work better than Europe’s first try – the numbers should work as expected. But this is one we’re sure to watch as it takes each step forward – and we’ll be quite content if it all goes as Obama expects it to. And just a little surprised.

American plants of all stripes have progressed to the point that belching smoke like this has become pretty rare – so welcome to China – now producing more carbon emissions than the U.S. No real comment intended by that – yet - we’ll see what comes out of the climate change talks.

1 comment:

Egy Azziera said...

First off we would like to congratulate you on your fine public speaking skills. It looks like those who said the Obama Administration would strike while the iron is hot may have been correct, and the Administration may be doing it in a way that does not require them to even get a vote in Congress.