Economists Call for Auction in Carbon Program

Guest Blog | March 4, 2009 | Press Releases

Knoxville, Tenn. (March 4) – The Southern Alliance for Clean Energy today released a statement signed by more than 600 economists supporting 100 percent auction of emission credits in a carbon-control cap-and-trade program. SACE delivered this statement to Congress, showing that auctioning pollution allowances will be the most effective way to create a successful program that addresses global warming while promoting a healthy economy.

The list of signatories includes hundreds of influential economists, including Nobel laureate Eric Maskin; Harvard University’s Greg Mankiw; and Northwestern University’s Bruce Meyer. These experts confirm that auctioning emission credits is a crucial component of any cap-and-trade regime.

“This statement provides overwhelming support for a carbon cap-and-trade system that auctions credits. Ensuring that polluters pay for the cost of such legislation is one of the most important actions policymakers can do to assemble the building blocks of President Obama’s vision for climate legislation that reduces pollution and protects consumers,” said Dr. Stephen A. Smith, executive director for the Southern Alliance for Clean Energy.

“Auctioning these credits provides policymakers with the financial resources to invest in a variety of programs or initiatives that will offset the cost of the program to families across the country. Giving credits away to polluters for free will only saddle consumers with higher prices while polluters walk away with windfall profits. Our citizens deserve better.”

While many polluters argue in support of free carbon credits, past experience shows that this method fails. When the UK gave credits away to polluters under the European Union’s trading program, the result was higher costs for consumers and windfall profits for polluters. In December 2008, the UK reduced free credits, moving toward an auction system. As a result, their first auction last year netted $81 million.

“President Obama has made it clear that a cap on carbon is a priority,” said Dr. Smith. “The U.S. is equipped with the knowledge, research and opportunity to create a cap-and-trade program that auctions all credits. Now is the time to implement this program using the most effective strategies.”

Find the Economist Statement and a full list of signatories online at # # #