Hot Spots in the New Legislative Climate Change Proposals
6 Pages Posted: 2 Jan 2008
Several new climate change proposals are now before Congress. This comment on Victor Flatt's forthcoming article, The Legislative Temperature on Climate Change, notes some surprises. The first surprise is that, unlike past environmental legislation, several bills showcase market-based regulation (MBR) without first going through a sequence of more dirigiste regulatory measures. This altered pattern undoubtedly reflects the perceived success of the U.S.'s cap-and-trade program for acid rain precursors, as well as other cap-and-trade legislation here and abroad. The second and bigger surprise is that some MBR proposals call for payment by the regulated entities, in the form of auctioned emission permits or even taxes, instead of purely grandfathered permits. This development may reflect divisions among the regulated entities. As between MBRs, most economists prefer emissions taxes to cap-and-trade, but cap-and-trade has some advantages, including prior experience and enhanced possibilities for paying less developed nations for participating-including avoiding burn-offs of tropical rain forests. Whatever MBR systems may emerge, however, they will only be as good as the monitoring systems for emission reductions and sequestrations.
Keywords: climate change, global warming, environmental legislation, cap and trade, market-based regulation
JEL Classification: K2, K32
Suggested Citation: Suggested Citation