Yet another reason to oppose free allocation of carbon permits
Posted by Rich Sweeney on March 27, 2008
If permits are given away for free to industry, it is essentially a transfer of wealth to equity holders. As many people, such as Gilbert Metcalf and Terry Dinan have pointed out, this exacerbates the regressivity of a carbon cap, because equities are disproportionately held by richer Americans. But clearly that’s not enough to make politicians abandon the idea of free allocation, as all the major Congressional bills still have some permits being given away for free [right Daniel?].
So maybe this will work: According to the Treasury Department, as of June 30, 2006, foreign investors held 10.2% of US equities. Assuming foreign holdings are diversified, that means that up to 1/10 of America’s carbon revenue, which will be tens of billions of dollars, will be effectively given to foreigners. And then the rest will be transferred to rich people. Politically, how is this even still an option?