[PEN-L:32568] Re: PK on NSR

[Bill Lear <rael@xxxxxxxxxx>]

On Tuesday, November 26, 2002 at 08:20:24 (-0800) Devine, James writes:
>comments on cap-and-trade?

The following exchange is from Robin Hahnel.


Bill

Mon, 23 Feb 1998 20:08:24 -0500
Robin Hahnel (rhahnel@xxxxxxxxxxxx)

Max B. Sawicky wrote:
>
> > > If government gives away emissions permits, then clearly
> > > corporations do not benefit as a group, since one firm's
> > > sale is another's purchase. If the government sells them,
> > > corporations are net losers in the aggregate.

For every tradable pollution permit policy in which the government
sells the permits there is an "equivalent" pollution tax policy that
yields the exact same outcomes: same overall reduction in pollution,
same individual reductions for each polluter, same overall cost of
reduction to polluters as a whole, same individual cost of reduction
to each polluter, same gain in government revenue (from permits sales
in one case, from taxes paid in the other). EXCEPT...

One must assume that the permit market is competitive and functions
perfectly smoothly finding its theoretical equilibrium infintely
quickly, etc. etc. -- the usual convenient and unrealistic
assumptions, where no such assumptions are necessary for the pollution
tax to be efficient.

The above means there is always a pollution tax policy that is equal
to or superior to any permit policy on purely technical grounds.

When the government gives away permits to polluting corporations they
implicitly award legal ownership of the environment to polluters
rather than pollution victims. They make a summary judgement entirely
in favor of polluters regarding the last remaining common property
resource (and therefore still disputed property) on the planet. When
the government gives away pollution permits to corporations it is like
the government giving away not only the right of way land to the
railroads in the 19th century, but all of the land within a thousand
miles of either side of the track they lay. Except in this case we
don't even get a railroad track!

Pollution permit give-away programs have NO technical or efficiency
advantages over pollution taxes, may be technically inferior (due to
realistic probabilities of market failure), and are the worst
imaginable policy on equity grounds.

When governments do not collect pollution taxes (or sell permits), but
instead give permits away for free to polluters -- model citizens that
they have proven to be -- and therefore collect other taxes from other
people to finance government programs, just who do you think they
collect those taxes from? Last I heard the common working stiff not
only held a job but paid more than his/er share in taxes as well!