Skip to main content

A better version of cap and trade

Besides the health care bill, one of the most controversial bills before Congress right now is the cap and trade bill.  The basic idea is that the government would auction off a limited number of permits to emit to companies.  Because there would then be a cost to emitting greater amounts of carbon dioxide, energy created in an unclean manner would cost more creating a market incentive to sell cleaner energy and for consumers to purchase it.

Since this auction would take place annually, it would raise between $50 and $300 billion for the government each year.

The primary criticism of this bill is that it amounts to a tax on energy, thus raising prices, hurting business, and reducing jobs.  This seems like a legitimate concern, since it does take $50 to $300 billion out of circulation each year. 

Never-the-less the notion of using a cap and trade system to reduce emissions and dependence on foreign oil by internalizing the costs is admirable.  Thus below I propose a system of cap and trade that is simpler and keeps all the money in the economy while mostly keeping government out.

Rather than auctioning off emissions credits to raise money for the government at the expense of taxpayers, the government should set up a nationwide secondary economy, whose distribution is determined through an online market, freely accessible to all.

Each American citizen would be automatically allocated a share of emission credits each year.  Each business and government agency would receive shares equal to their number of employees.  This would result not only in a fair distribution of credits based on company size, but would also create an additional incentive for companies to create jobs.

The purchase of many products whose manufacture or use creates emissions (i.e. gas, beef, heating oil, electricity) would require the expenditure of a certain number of credits (based on its environmental impact) in addition to its monetary price. Use of these credits would be tied to individual credit and debit cards or (if requested) to an individual PIN entered during a cash transaction.

All citizens, corporations, and government agencies would also be able to log onto the online market with their social security or Tax ID numbers to sell or buy credits at a monetary price determined by supply and demand.  Low emitters would make money and high emitters would pay, but all the money would stay in the economy.

Comments