Actually - I'm a believer in emissions trading IF done right. But your graph shows what is wrong with the national version of this. Done right, it equates marginal benefit across regions and equates marginal cost across firms. But that would have standards set regionally given the high density in some regions in the East and the low density. The Bush version has a national price so we get equal marginal cost across firms but very different marginal benefits across the region. Folks in Utah will get rich selling their rights to polluters in Pennsylvania. And they enjoy a clean enviroment as folks in Penn. will not.
pgl | 03.21.05 - 6:06 pm | #

I also believe in a market for pollution rights, when done properly, but the capital IF at the top of your post says it all. One large national market does not fit all...
Mark Thoma | Homepage | 03.21.05 - 6:18 pm | #

Max has more. Not an encouraging more, either.
Ken Houghton | Homepage | 03.22.05 - 6:57 am | #

Mark - thoughts for posting my comment with appropriate revisions. I'll have to find it but Alan Blinder has a brilliant discussion on emissions trading that got me thinking in this direction. If only Bush would hire and LISTEN to economists like Dr. Blinder.
pgl | 03.22.05 - 3:02 pm | #