An Unnecessary Drag on the Economy

Jane Van Ryan
Posted September 8, 2009

Today, inspired by a New York Times weekend editorial, Energy Outlook blogger Geoff Styles discusses the Waxman-Markey climate bill and the legislation's potential impact on gasoline prices.

Geoff says the Times doesn't get the rationale for cap & trade as well as they think they do:

"The Times appears to accept the government's analysis suggesting that the increase would amount to no more than 20 cents per gallon by 2020, though this conventional wisdom collides with common sense, since such a low price on carbon seems unlikely to stimulate sufficient conservation and investments in efficiency to deliver on a steadily-shrinking national emissions cap. In particular, the Times seems unfazed by the way the bill's allocation of free emission allowances is stacked against the oil industry, suggesting that it, of all industries, can surely afford the extra burden. Yet it's precisely that distortion that I believe could throw all of the official estimates of future permit prices--and thus gas prices..."

He closes his post saying that creating such a wide demand disparity for allowances among business sectors risks driving prices higher, imposing an unnecessary drag on the economy.

For more information, read Geoff's full post.