Jun 14, 2008

New Idea For The Green Party - Cap And Trade For Liquid Fuels

Now this idea, which we have stolen in full from the Wall Street Journal will not do much for the price as a fall in New Zealand demand will have zero impact on a global market we should not let this worry us. The emissions trading scheme proposed by the Government will probably result in an increase in global emissions thanks to business choosing to leave carbon efficient New Zealand to less efficient countries. But if it increases the pace of introduction of electric cars and a better public transport system in Auckland then we are all for it.

Although the Senate's recent attempt to introduce a cap-and-trade system for carbon crashed and burned when it collided with $4 per gallon gasoline, fear not. Some in Congress are fearlessly tilting at another windmill: the "windfall" profits earned by oil companies.
Unfortunately, by reducing supplies, a windfall profits tax will only lead to even higher prices. Still, if Congress really wants to "do something" about high gasoline prices and global warming, it can always try rationing.
To lower gasoline prices permanently, you can reduce demand, increase supply, or do both. Congress long ago capped supplies by proclaiming from on high: Drillest thou not offshore, nor in ANWR. The next obvious step for our solons is to cap demand by rationing gasoline, and then gradually reduce the quantity of ration coupons.
"Trading" in coupons would be encouraged to ensure gasoline is allocated to uses of only the highest value. So Congress could reserve quantities of ration coupons for key lobbyists and their clients. Environmentalists could buy up coupons and "retire" them, lowering gasoline sales even more. Refineries could continue to produce gasoline, but as consumer demand would be sharply limited (and declining), oil companies would be forced to reduce the prices they charge. No more windfall profits! And lower carbon emissions!
For legislators and environmentalists – if not average citizens – this plan has other virtues: As ration coupons are reduced, consumers would increasingly clamor for more electric cars, cars that ran on French-fry oil, and "flex-fuel" cars that burn everything from gasoline to garbage. Eventually, gasoline could just be banned, reducing prices to zero and eliminating all ill-gotten profits.
And if Congress then had to tackle French-fry oil speculators and impose a windfall profits tax on Big Spud, well why not?