The London Times reports controversy about how the auction revenue should be spent:
Protests as carbon permits auction raises £54m
The Government has provoked anger by saying proceeds of sale will not necessarily be used to tackle climate change issues
"Yesterday's auction marked a departure from the policy of handing out the permits to industry for free."
...
"Campaigners said that the Treasury's decision to put the proceeds into its coffers rather than ringfencing them for use in environmental projects plays into the hands of critics, who fear that the ETS will be treated as little more than a green tax. "
I gather "ringfenced" is an antonym of "fungible."
Wednesday, November 19, 2008
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Interestingly, The Economist (another London-based publication) just recently advocated in favor of a "green tax."
Indeed, a "green tax" (or rather, "non-green tax," since firms are "taxed" for polluting) should have greening effects so long as the rates are set efficiently.
A firm is induced to adopt green technology if its cost of greening is less than
(1) the market price of a permit and
(2) the fine associated with not having a permit. Since the firms are heterogeneous (they are not all cement companies) the auction should set a price above some firms' green-ceilings. The real burden is upon The Government to set and enforce efficient fines.
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