As the cap-and-trade bill has progressed through committee -- a draft is expected any day now -- more and more pollution rights have been allotted in advance to favored interests, free of charge. The final committee bill will probably give away at least 50 percent of all allotments, maybe even 75 percent. The freebies blow a huge hole in the budget plans of the White House, which has been counting on cap-and-trade payments from industry to help cover the enormous deficits the administration will run in coming years...Cap and trade's political viability is the same as the political viability of tax deductions: it creates a complex system that gives politicians the ability to pick winners and losers and favor certain constituencies and technologies over others.
Cap-and-trade legislation will not only be contorted to favor the Democrats’ regional loyalties. In addition, it will be skewed to favor the preferred energy sources of the Obama administration -- wind and solar. These two sources face daunting technological hurdles and unforgiving economics on their own. Consequently, the measures to promote them must be hidden from sight, since no Congress would pass the taxes otherwise necessary to make them viable.
Waxman’s committee looks likely to include a straightforward quota for wind, solar and other renewable power. Utilities will ultimately be required to derive up to 25 percent of their power from these sources -- without regard to cost or the existence of cheaper, non-carbon emitting alternatives. The massive extra cost will be spread across power bills in ways that consumers will never see.
It increases political power while distorting the market. This distortion poorly allocates resources, stifling innovation and slowing progress, thus increasing the cost of low-carbon energy beyond what it would be with a simple, across-the-board carbon tax.
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