Comparing Obama and McCain on Climate Change Policies

This is an interesting little piece in The Guardian.

In broad terms, they follow the predilections of their own parties – McCain favouring the market, Obama regulation and state intervention. So while both subscribe to a system of cap-and-trade, where a ceiling on emissions is imposed on polluters, the details are telling.

Obama would require all firms to buy CO2 permits – a system known as 100% auctions – to raise income that could then be reinvested in clean energy. McCain would largely hand out the permits in the spirit of avoiding new taxes, keeping regulation to a minimum and trusting business to do the honourable thing.

The difference between 100% auctions and free handouts is of course corporate pork to the incumbent firms. It protects them against any insurgent companies, as they have the permits and their nascent competitors don\’t. We shouldn\’t be surprised that this is what the Republican is proposing.

On the other side, such green taxes are not (in the theory anyway) supposed to be about raising money for new spending. They\’re about pricing an externality into the market. Taxes in other areas should be reduced instead of a gleeful doling out of all that new pork. But then it\’s no surprise to see a Democrat not getting that point either.

Obama\’s approach is to set targets. He wants a 10% reduction in vehicle emissions by 2020 and a further 1% every year thereafter. He would also force power companies to generate a quarter of their output through wind, solar and other renewables by 2025.

Similarly, no surprise.

Obama\’s great weakness is ethanol. Obama supports subsidies for the controversial biofuel that is much loved in the corn-growing hinterland of his home state, Illinois.

He also approves the high import barriers on Brazilian ethanol that is made from sugar cane, prompting grumbles from both development economists and many environmentalists who believe ethanol is of limited value.

And that is indeed a great weakness. Given that corn ethanol produces more emissions than burning the oil in the first place….however, again, it\’s not that much of a surprise to see a Democrat from the Mid-West going that way. I\’m not sure about Illinois but I\’m pretty certain that in some of the states the actual name of the party (at least historically) is the Farmer-Democrats.

Both McCain (no auctions) and Obama (ethanol) can thus be seen to be pandering to their natural supporters, both groups in effect saying, "Screw the country, where\’s our subsidies?".

But then who ever thought that politics wasn\’t about that?

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