N. Gregory Mankiw, a professor of economics at Harvard and a former adviser to President George W. Bush, published an opinion piece in the New York Times arguing that President Obama should refuse to sign any climate change bill that gives away the vast majority of carbon permits under a cap-and-trade system.
He says that a cap-and-trade system could be as effective as a carbon tax in reducing greenhouse gas emissions. Cost increases will ultimately be passed on to consumers, Mankiw says. However, if the government gives away carbon allowances instead of auctioning them off, it will not have the resources need to cut other taxes that would offset price increases to consumers and businesses.
If the government auctions the permits to carbon polluters, it could generate $989 billion over 10 years that could be used to offset other taxes. But under the Waxman Markey bill, auction procees will only raise about $276 billion--and this number could fall after the Senate goes to work on the bill.
Read Mankiw's full opinion piece at the link below.
