by Roger Koppl
The Los Angeles Times reports, “Industry is warming up to Obama’s climate plan.” It seems many big businesses, including Alcoa, want to go green. To what do we owe this sudden tree-hugging zeal? It could be an altruistic desire to save the planet, but I have a more skeptical opinion. I think they see it as a way to keep the competition at bay. “Cap and trade” is essential to the Obama plan. If emission permits cost $20 per ton (per year, presumably), “then cap and trade might add $460 million a year to Alcoa’s annual operating costs.” That sounds pretty painful for Alcoa stockholders. But Alcoa is pushing for a plan in which the government gives, “companies like Alcoa nearly enough free permits in the early years of cap and trade to cover emissions.” In fact, there seems to be some expectation that Alcoa may get so many permits that it would have surplus permits to sell. What looks like a self-sacrificing corporation rising above itself to act in the social benefit turns out to be ordinary rent seeking.
And Alcoa is not the only established business in a position to enjoy such largess. “The White House has signaled a willingness to provide financial offsets and other relief to the states and companies that would be hit hardest by new cap and trade rules.” Existing firms are subsidized and startups are taxed simultaneously. Welcome to the brave new world tiresome old world of “partnership” between business and government.
As a general proposition, cap and trade is a good idea. We should cut down on pollutants, including greenhouse gases, and we should leverage market forces to do so. Nothing in such principles puts an end to rent seeking, however — or causes water to run uphill.