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Blog

    Cap and Trade, but Trade What?

    04/24/2009

    According to some Republicans in Congress, Rep. Henry Waxman (D-CA) who is heading the panel on environmental policy is trading certain allowances or exemptions to cap and trade legislation to members of Congress.  They claim that he's trading the allowances to get the votes he needs to pass environmental legislation.

    Trading votes for the exemptions creates some interesting incentives for the companies in the districts that will benefit from them.  Just for the purpose of analysis, let's assume that cap and trade legislation forces every factory in the country to pay $10 million in new taxes to the government.  If certain businesses are exempt to the taxes, then they'll have a $10 million advantage per year over their competition.  While the numbers under a cap and trade system will obviously be different, the incentives created by Congressmen trading favors on this issue are the same.  The companies that are confident that they'll receive exceptions could actually lobby in favor of cap and trade legislation to help put their competition out of business.  These Congressmen will no doubt benefit from large campaign contributions from the industries that they "saved" in their district.

    As Ayn Rand wrote in her novel, Atlas Shrugged, "when you see that men get richer by graft and by pull...you may know that your society is doomed."