I think we all know that I'm slightly out of step with many of you: I think climate change is happening and that we ought to do something about it. However, when I watch the politicians stumbling in the dark as they attempt to do something I'm quickly reminded that it's normal for the political process to produce something which is worse than doing nothing.
As Lexington in The Economist notes there's a new suggestion in the US about what to do. Sensibly the idea is to do away with the entirely pork laden and counter-productive measures that have already passed the House and do something more sensible. Instead of cap and subsidise, have cap and dividend. This raises the price of carbon emissions, yes (which is the whole point) but returns the money raised by auctioning them all to consumers in the form of a dividend.
It would be simpler and easier to do this by imposing a carbon tax but that is regarded as a political non-flyer, sadly.
Then we're told about the details. In the trade part of the cap and trade thing (trade being an essential part of a cap and trade system, as the phrase indicates) the legislation would deny most opportunities to trade. More specifically, it would deny speculators from trading the permits (seemingly entirely unaware that speculators both provide liquidity and accept risk): and yet there could still be speculation but it would be pure speculation, without either providing liquidity in the real market nor accepting risk.
Some time ago some of us at the ASI (in our secret underground lair at which we sacrifice socialists and statists to our statues of Adam Himself, Bastiat and Hayek, as you know) were pondering this very point. A properly designed cap and trade system would be the best solution. Then we pondered on the politicians we actually have, rather than those we would like to have, and quickly concluded that a carbon tax would be better, giving less opportunity for said politicans to get it wrong: and in the absence of that perhaps nothing was better than whatever we would get.
Can't say there's been all that much to change that conclusion as yet.
