A Bridge too Far?

Martin Feldstein warns us about cap-and-trade:

Companies would buy permits from each other as long as it is cheaper to do that than to make the technological changes needed to eliminate an equivalent amount of CO2 emissions. Companies would also pass along the cost of the permits in their prices, pushing up the relative price of CO2-intensive goods and services such as gasoline, electricity and a range of industrial products. Consumers would respond by cutting back on consumption of CO2-intensive products in favor of other goods and services. This pass-through of the permit cost in higher consumer prices is the primary way the cap-and-trade system would reduce the production of CO2 in the United States.

Since the U.S. accounts for only 25% of CO2 output, a 15% reduction (the bill’s goal) only reduces CO2 output by 4%. Such projection also assumes that American businesses won’t flee overseas to escape our regulatory regime, thereby pushing up CO2 output in other countries and reducing economic activity and jobs here. Feldstein puts the cost at $1,600 per family; others have it at nearly $4,000.

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A Bridge too Far?

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