President Obama new budget proposals have been rather well received both by the American public and many in the academic as well as the environmental communities. The proposed budget is after all honest, courageous and is a blue print of what President Obamas' vision for the US looks like. It is a vision that is well grounded in a society that has a national health care system, a nation whose citizens have access to educational institutions, a society that promotes clean renewable energy and that encourages its industry to decrease its emissions substantially.
One revenue source for the year 2012 does not exist yet; the projected revenue fro Cap-And-Trade. The policy itself is not controversial but the method of implementing it is already causing a split inside the environmental community. Should the government
"oppose the free allocation of credits to emitting industries under a carbon cap and trade program and support auctioning 100 percent of the credits immediately."
or should we
"oppose the free allocation of all of the credits to emitting industries under a carbon cap and trade program and support auctioning up to 100 percent of the credits immediately within five years."
What do you think?
5 comments:
Auctioning off the credits within a period of 5 years sounds like a better target. If the economy were to improve over the next 5 years, then production in firms that emit carbon would likely increase. This would cause an increase in the demand for carbon credits, as firms would seek out ways to allow them to emit more carbon. Given the limited supply of the credits, the government would likely receive higher bids for credits with an improvement in the economy and thus greater revenue from the program.
Jackson
I think that the idea of the U.S. taking money from the companies that seek the right to pollute is a terrible idea. A result of this will be higher prices on the goods produced by these companies, and a net loss to the American people. With the current economic crisis looming, I feel that this is not the right time to be experimenting with this kind of radical change. It will only work to hurt the economy while giving the government more money to waste on inefficient programs.
If carbon emissions must be lowered, I believe a better system would be to offer tax breaks to companies who lower their emissions. One step that would make this a more viable option would be to cut government spending substantially, lowering the need for tax revenue, and allowing these tax breaks to become recognized. Instead, with the tax hikes that Obama is already working towards forcing on companies, I think adding higher costs to production that will inevitably come from the cap and trade system is a very dangerous proposition. Unemployment rates are already skyrocketing and will only go up as companies will need to find ways to lower costs, or when companies find production to be no longer profitable and close up shop. Energy industries will probably be hit the hardest first, and layoffs should be expected.
I remember Obama stating during the presidential race that anyone who wants to operate a coal company would be free to do so when his cap and trade program is put into place, but that they will undoubtedly go bankrupt in the process. I think this kind of message shows that he is not concerned with the jobs that will be lost as a result of such policies.
I also expect this policy to negatively impact the stock market, due to increased costs of production for all industries. Why would one want to invest in industries that are already struggling, and are destined to face high costs? Not to mention energy rates (electric bills) are going to rise dramatically from the implementation of such a policy. I think that the question should not be which policy of auctioning off pollution permits should be used, but instead whether or not the concept of cap and trade is an efficient one, and even if it is, is now really the time to be putting it into practice?
-Mike Fitzgerald
If we are to introduce cap and trade it should be over the 5 year period. I agree with Mike that this may not be the right time to impose such a policy but I disagree that tax incentives will be enough to reduce the pollution. The cap and trade allows us to set the amount of pollution we allow companies to emit, based on levels of acceptable pollution (I know, who's to say what is acceptable). Here is the hard part. The politicians must ensure that the money from the tax only be used specifically to help clean the environmental problems that the emissions cause. With only a tax credit there is no money to help clean the damage that is caused and no guarantee that these companies will take advantage of the tax credit. If the price of credits is unreasonable then we can always adjust the number of credits at a later date.
Courtney Hansen
yes I agree with Jackson the 5 year plan seems like a better one due to the economic state the government is in right now. Although I do think that this should be a permanent fix like the cartoon shows, we shouldn't be able to buy tickets or passes that allow us to pollute but I think this is a good start in moving towards a much more eco-friendly economy. Daniel Abberton
I can't help but disagree with Mike on his comments. First, the idea that our government will reduce spending and decide to decrease tax revenue seems a bit too idealistic and improbable, at least in the near future. Second, of course the cap and trade or the carbon tax will both increase the cost of production (but that is the point. We need to "internalize" the environmental costs in order to fix these market problems of over producing and over polluting. The higher costs will be passed to the consumers and if economic theory is correct, the consumers will use less and conserve more (another goal of the program).
When it comes to unemployment I agree that a sudden change in policy that will decrease production will cause unemployment to rise and the new "eco" friendly industries will not be able to expand fast enough to absorb these layoffs. However, a recession, in my opinion, provides a perfect opportunity to start a new industry and to do it the right way. It would be tougher to bring these changes when the economy is strong and changes are tough to sell in the absence of an environmental catastrophe caused by carbon levels.
Finally, when it comes to the stock market, I really don't care about short term ups and downs of stocks. The market is not always a barometer of the entire economy (2007 looks looked like a pretty good year and yet all the valuations and real estate problems wiped out 17 trillion in the next year). So I would not worry about the effect on the stock market. Let the CNBC analysts that only look at one quarter at a time worry about the "earnings". All regulation is a treat to business and yet some regulation is a must for a strong economy.
With that said, I would would take Cap and trade either way (right aways of within 5 years). The immediate implementation is a bit scary I have to admit, but if the proceeds from the permits will go to offset electric and utility costs I can see it being done right away. However, it seems logical and "safe" to implement the program within a 5 year period.
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