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?
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