Proof Positive Legislators Don't Understand Even the Basics of Economics

OK, actually, this could also just be proof positive that legislators know exactly what they are doing and want legislation that panders to powerful interest groups without actually doing anything.  Democrats in Congress have proposed a new nationwide CO2 emissions / permitting system.  The point is to allocate permits for something less than current emissions, forcing Americans to either cut back to their permit level or trade permits around. 

So I thought this provision was hilarious:

The bill tries to address the economic concerns by excluding small
businesses and increasing the number of permits when prices spike.

So when permit prices go up, they will increase the number of permits.  But permit prices will necessarily go up if they are doing their job of limiting emissions below current levels.  So, in effect, they are saying that if the permit process really does start limiting emissions, new permits will be issued to to allow more emissions. 

  • I think that's actually a bit less naive than it sounds. The idea is that if permit prices rise massively, then it's probably worth it to trade off some more GHG emissions for increased productivity. I'm not saying this is the reason why politicians support this, but it's not totally indefensible. I think is a subject of much debate amongst economists.

  • I should also say that this sort of setup is called a "safety valve".

  • David

    Hmm...so if you have to have a permit to produce CO2, and they do their best to keep the price of permits constant - that sounds an awful lot like being able to produce as much as you want, with a fixed cost per production - almost like those nasty unpopular things called taxes! With, of course, all the advantages of politicians getting to decide who gets permits free, or at a discount, and being able to adjust the price in an arbitrary, opaque manner.

    Of course, there's also this: "Reductions wouldn't begin until 2012, allowing time for the necessary technology to be developed." Because everyone knows that 3 years is plenty of time to develop any technology we want! Why, just three years ago we outlawed death, and look, with a real incentive, all the health companies delivered, unlike beforehand when they had the answers but just didn't know that anyone cared.

    Or more cynically, because waiting until 2012 to do anything means that there's time for the AGW crowd to see the vote and help reelect their politician, but not time for the pain to occur and do anything like actually threaten the politicians. It's almost like paying for a bailout with debt rather than taxes.

  • Jeff

    Remember when taxes became "Usage Fees"? Well now they're renaming carbon "Usage Fees" permits.

    It's all about the money. They would tax, err i mean permit, the carbon you exhale if they could get away with it.

    Jeff