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Comments on: Emission trading: Fairness and efficiency http://www.tvhe.co.nz/2007/08/20/emission-trading-fairness-and-efficiency/ The Visible Hand in Economics Mon, 20 Aug 2007 01:23:11 +0000 hourly 1 https://wordpress.org/?v=6.9.4 By: rauparaha http://www.tvhe.co.nz/2007/08/20/emission-trading-fairness-and-efficiency/#comment-150 Mon, 20 Aug 2007 01:23:11 +0000 http://tvhe.wordpress.com/2007/08/20/emission-trading-fairness-and-efficiency/#comment-150 I agree with you in principle; however, I’m not convinced that forcing firms to bear all the costs of emitting immediately is the best way forward. Any sort of regulation needs to have some measure of public support to be viable. Forcing firms who have invested on the basis of free carbon emissions to bear the cost of those emissions is likely to result in the loss of a large number of jobs in the short-run. Avoiding this sort of seemingly catastrophic consequence is important if there is to be widespread national support for our participation in Kyoto.

However, I would favour an auctioning off of permits with some of the proceeds being used to give short term subsidies to firms that need it in order to ease the transition to the new regime. Giving them away for free certainly doesn’t seem to promote efficient behaviour.

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