3.11.08

POOR CHOICE OF WORDS. As I'm posting this, the votes are being counted in Hart's Location and Dixville Notch. The last kerfuffle appears to be Senator Obama's mishandling of a relatively simple environmental policy problem, which a cross-section of his critics interprets as envisioning with equanimity the bankruptcy of the coal industry. Armed Liberal suggests such people get a grip.
So under cap-and-trade, you can build a "clean coal" plant - one with extremely low carbon outputs - but if you build a "dirty-coal" plant, the cost of the carbon output will be uneconomical.
There are cap-and-trade auctions already.
About 50 million units were bid upon, while just 12.5 million were offered. The demand pushed the clearing price to $3.07 a ton, higher than the $1.86 a ton minimum bid.
A coal industry that operates as if the use of the atmosphere is free will not look like one that operates as if the atmosphere is a scarce resource with a price (I think that's a Harold Demsetz observation) but markets exist to allocate resources. Since greenhouse gas emissions that have done no work to power a turbine or reduce an ore represent wasted fuel, the cap-and-trade strengthens incentives to reduce fuel use that existing prices provide.

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