Cap-and-trade datapoint of the day

By Felix Salmon
June 22, 2009

I am very happy that the CBO has finally gotten around to costing out Waxman-Markey, so that we don’t have to put up with pseudoscientific scaremongering any more.

The Congressional Budget Office (CBO) estimates that the net annual economywide cost of the cap-and-trade program in 2020 would be $22 billion—or about $175 per household… households in the lowest income quintile would see an average net benefit of about $40 in 2020, while households in the highest income quintile would see a net cost of $245… Overall net costs would average 0.2 percent of households’ after-tax income.

A reasonable price to pay, I think, for massively reducing the economy’s reliance on oil imports and working to curtail the potentially catastrophic tail risk associated with global climate change. Note that ancillary benefits, such as economic and competitiveness advantages which flow from the private sector making significant investment in clean-energy technologies, are not included in this calculation; it doesn’t even include $22 billion a year in energy savings which will result from the act.

Note also that if there’s a faster-than-expected move from giving permits away to auctioning them, the scheme could in and of itself generate significant net benefits: the CBO assumes that only 17% of allowances would be sold in 2020, while fully 83% would be given away.

So yes, the ideal cap-and-trade bill would be much better than Waxman-Markey. But Waxman-Markey is vastly better than what we’ve got right now, which is nothing.

(HT: Avent)

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