Has a thought about how to get votes for a cap and trade bill in the Senate without giving a windfall to incumbent polluters. The problem is that it seems to be necessary to buy the votes of coal state legislators. The House’s solution is to give C02 permits to current polluters. This is a pure transfer. It will be very relevant to shareholders of those firms, but not so important to anyone else.
The idea, such as it is, is to give to agents in states which would otherwise bear more than their share of the burden of reducing greenhouse gas emissions, that is, states with coal or states where lots of coal is currently burned.
My idea is to auction all of the permits and set up a fund to compensate overburdened states by giving money to the state government. The formula would be uhm complicated and negotiated endlessly but basically close to cap and trade revenues from the state.
The advantages of this approach is that a transfer from Federal to state governments is desperately needed right now. That means it would be important to transfer funds now based on expected future revenue.
The problem is that once the market for votes in the Senate is made explicit it will be even less restrained by shame or hypocrisy than it is now.