As cap-and-trade legislation gets debated in Oregon and Washington, a worrisome lightbulb seems be going off for a number of folks. (Congressman DeFazio from Oregon, for example.) It goes like this: Instead of "cap-and-trade" how about just "a cap without the trade?"
Under this idea, we'd meet the terms of the cap through command and control regulation. There wouldn't be permits or a trading system (and hence no auctioning). To be sure, this will reduce emissions, which is a very good thing.
But in terms of fairness and inexpensiveness, let me be completely clear: This is a horrible idea.
For consumers and businesses who are already struggling to pay their energy bills, cap without the trade is actually worse than the very worst form of cap-and-trade. Plus, it misses out on almost all of the upsides of cap-and-trade done right.
In the worst form of cap-and-trade -- a "grandfathered' system, in which the government gives out permits to polluters for free -- consumers wind up paying massive windfalls to the big energy companies that get free permits. [Click here to learn why]. That's why we favor auctioned cap-and-trade, since it makes polluters pay for their permits -- and the public keeps the money. Auctioned cap-and-trade is fair, effective, and efficient.
But if you can believe it, cap-and-no-trade would actually be worse for consumers and businesses than a grandfathered system. Families would pay even more for energy, while Exxon and other big energy companies would get even bigger windfalls!
Here's why.
