Cap and Trade: Grandfathering Still Sucks
Kevin Drum takes a crack at explaining the woes of "grandfathering", and nails it:
If you give away permits [under a cap and trade system], common sense suggests that since there are no additional costs to emitters, they won't raise their prices. But it turns out this isn't true. Thanks to the opportunity cost of the permits, they'll raise their prices just as much as if they'd bought the permit in an auction. (This isn't just a theory, either. That's how the European cap-and-trade system worked initially, and prices really did go up. If you want the gritty detail on why it works this way, read this paper.) So: power plants end up raising their prices, but since the emission permits are free their costs don't change. Result: a huge windfall profit for GHG emitters. Some get more and some get less, but the overall net result is lots of extra profit, with the biggest polluters getting the biggest profit.
Soon enough, if everyone who understands this point keeps repeating it, it'll sink in. And then--hopefully--the press will stop looking at us cockeyed when we explain that giving permits away for free WON'T help consumers.
But let's hope it sinks in before Congress, or individual states and provinces, pass some misguided cap-and-trade legislation that gives away lots of permits for free.
Truckers Hit the Brakes
No kidding, the American Trucking Association wants trucks to go slower:
The plan calls for governors on new trucks to limit speeds to no more than 68 mph, a call to reduce the national speed limit to 65 mph for all vehicles...
The proposal isn't just altruism. It's another instance in which self-interest and the public interest are aligned. Soaring diesel prices make it economical to reduce speed, thereby saving fuel and carbon emissions.
We've heard anecdotes about this, and we even seen some empirical research. Now we're seeing intentional policy. There's other good stuff in the plan too:
Also on the list is reducing engine idling, improving highways, using more productive truck combinations, and setting fuel economy standards for trucks.
Apparently, a number of trucking companies are already taking the initiative to get creative about reducing fuel use. They're crunching the numbers to find savings -- and then they're reducing load weights, switching to effiicient tires, upgrading lubricants, and installing aerodynamic panels.
Chalk this up as more evidence that the transportation sector really does respond to price signals. Just as in other energy sectors, smart policies can wring all kinds of efficiencies out of the transportation system.
[Hat tip to Ross McFarlane; photo by Geognerd, distributed under a Creative Commons license.]
