A poll for The Economist by YouGov (see chart) found that 62% of Americans want carbon curbs, but only 30% would pay even $175 a year for them, and only 7% would pay $770. . . The CBO was asked to estimate the bill’s direct costs to consumers in 2020. It came up with a figure of $175 per year, per family. “Less than the cost of a postage stamp a day!” crowed Democrats. But that is an illusion. In 2020 the bill will not yet have started to bite, and the estimate excludes its effect on economic growth.The real issue is not simply how much cap and trade legislation will cost U.S. households. The politics of the issue are such that the answer necessarily must be "not very much." The real question is what kind of emissions reductions can you get for the low cost that the political process is willing to bear. Unfortunately, climate policy has not yet internalized this important boundary condition meaning that the political process is characterized by every trick imaginable to avoid, reduce, or otherwise make costs disappear. If climate policy were being developed with a better sense of political realities, then we'd see a dramatically different approach -- maybe even one that could actually work.
06 July 2009
The Cost of Cap and Trade
A survey by The Economist illustrates why the debate over the cost of cap and trade is somewhat misplaced.