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Changing Political Landscape and Paths Forward

Changing Political Landscape and Paths Forward. Dallas Burtraw February 9, 2010. Alternatives for US policy Waxman-Markey/Kerry-Boxer Energy leg., electricity-sector only leg., standards Cantwell-Collins (dividends) Clean Air Act.

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Changing Political Landscape and Paths Forward

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  1. Changing Political Landscape and Paths Forward Dallas Burtraw February 9, 2010

  2. Alternatives for US policy • Waxman-Markey/Kerry-Boxer • Energy leg., electricity-sector only leg., standards • Cantwell-Collins (dividends) • Clean Air Act

  3. The current situation?The Waxman-Markey/Kerry Boxer approach solves many problems (competitiveness, low income, electric utilities, cost) and suffers under the biggest one (allocation).

  4. How households are affected depends much more importantly on what happens to the rectangle than on the size of the triangle. Partial Equilibrium Costs in Cap-and-Trade PA

  5. Common Pool Resource1. Nonexcludable 2. DepletablePhilosophical reference: the resource is owned in common.

  6. Public Antagonism Wall Street shouldn’t get it Government shouldn’t get it Whose money is it anyway? Uncertainty…

  7. Does Policy Propagate Uncertainty? • Climate change poses an extraordinary coordination and cost-sharing challenge. • That challenge is amplified by the fundamental uncertainty about climate science. • Economic response and technological change add additional uncertainty about costs. • We find that policy implementation adds further uncertainty with respect to the effects on households. • The more complex the policy, likely, the greater will be the uncertainty for individual households.

  8. Three Uncertain Aspects (2016):LDC Provisions, Renewables & Technology, Energy Efficiency* Modeling H.R. 2454:

  9. Consumer Surplus Loss by Income Quintile The Middle Class Energy Tax Avg

  10. Uncertainty fuels the notion that the technocrats don’t know what they are doing.If the little guys can’t understand what is happening, the big guys win. …The devil is in the details.

  11. Options for Allocation Interest group politics Surgical allocation to address leakage Invest Return to consumersa. dividendsb. tax reform

  12. National Comparison Cap and Dividend(nontaxable) Permit Price $20.87 Income Deciles Dark Blue: Effect of cap/taxLight Blue: Net effect after accounting for revenue - National Tax Journal 2009

  13. Public finance view:achieve efficiencyuse other tools to achieve distributional goals For example, couple climate policy with separate tool for income redistribution • Common pool resource view: achieve fair, popular climate policyuse other tools to achieve efficiencyFor example, couple with reform of the tax preference for home mortgages

  14. How will households designate the value that may be returned to them through dividends? Strategy: Reinvest Dividends • Couple with existing education, incentive programs • Tax preferred expenditures • Borrow future year dividends at zero-interest • Tax-free revolving loan funds (Nudge) • More

  15. Thank you

  16. LDC Provisions and Energy Efficiency/Technology Development in 2016 Modeling H.R. 2454:

  17. Remaining Provisions Held Constant

  18. Electricity Price Effects of Allowance Allocation Auction Efficiency Advantage Lowest Social Cost but Higher Prices Free Allocation to Generators Reduces Price only in Regulated Regions Free Allocation to Consumers (LDCs) …But, Allowance Price Increasesby 12-15% With Subsidy to Elec. Consumption

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