Why is Greg Mankiw upset about cap and trade?

We may finally get meaningful climate policy in the form of a cap and trade bill limiting carbon emissions. Because the emerging legislation will give away (rather than auctioning) maybe half of the cap, this is a perfect illustration of Mankiw's (tongue in cheek) "first law of carbon taxation":

Cap-and-trade = Carbon tax + Corporate welfare

I have yet to meet major legislation that did not include substantial corporate welfare. And giving away big portions of the cap does not change any of the environmental benefits (e.g. acid rain regulation since 1990) Yet the efficiency loving Mankiw denounces the cap and trade bill as "highly flawed." What's the deal?

Climate policy chicken littles

Krugman writes this morning about the contradiction (or hypocrisy) of chicken littles. The claim is that doing anything about climate change will make us poor, because modern economies just can't develop substitutes to fossil fuels. But these are exactly the "market can solve anything" cheerleaders.

 

A related contradiction of these free market marketers : the biggest cheerleaders of foreign intervention to "secure" oil supplies are those who profess the greatest faith in markets. Bun market economies it doesn't matter who owns oil, because it will be traded to those who have the greatest interest in paying to use it. And for better or worse, that is still us.