Justin du Coeur (jducoeur) wrote,
Justin du Coeur

Just bribe the country to do the right thing

One of the problems facing the climate-change debate has been the current political shibboleths, and specifically the anti-tax one. Every sensible economist is clear that the *right* way to deal with it is a flat carbon tax: it would address the problem head-on, would probably be least likely to distort markets in unfortunate ways, and would likely be pretty effective. But of course, anything called a "tax" gets peoples' backs up, so we instead wind up with the Democratic leadership creating a classic muddle, in the form of the wildly overcomplex cap-and-trade model. (Which is *probably* better than nothing, but I honestly can't say that with complete confidence.)

So I'm intrigued to read (in last week's Economist) about Maria Cantwell's "cap-and-dividend" proposal. From the description given there (and I need to learn more about the details), it sounds delightfully sensible. Basically, the notion is that any carbon cap will drive up prices: indeed, that's the point of any sensible proposal. So fine: auction off limited permits for all carbon-based fuels, and then bribe everybody with the proceeds. Seriously: take the money from the auctions, and distribute it to the populace. Their back-of-the-napkin kickback calculation is $1000 for a family of four.

It's not perfect, mind -- a carbon-tax system would still be simpler than a cap-based one -- but it's still far simpler than cap-and-trade. If the auction is mandatory and universal, it's likely to succeed in the goal of raising prices and thereby reducing carbon output. And the bribe (which is effectively a progressive redistributive tax, but a very well-disguised one) could be *very* popular if it was marketed properly.

I confess that I'm seesawing between being appalled at the concept, and admiring its elegance. The citizens'-responsibility puritan in me is vaguely unhappy at the notion of bribing the citizens to get them to agree to a system that will help everyone. But the economist in me just loves the way it aligns incentives, and the armchair political quarterback admires the simplicity of the message...
Tags: climate change, economics, politics

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