Here’s a rather better view of the bio-ethanol program from Anatole Kaletsky:
Extracting ethanol from corn, for example, is less than one-tenth as
efficient as distilling it from sugar cane. But because of the lobbying
power of agribusiness in the Midwest cornbelt, the US severely
restricts the import of Brazilian sugar-ethanol and will now spend vast
amounts on technology and subsidies designed to undercut the
sugar-ethanol technologies with far greater potential for reducing
global carbon emissions at reasonable cost.
Similarly, the 10 per cent proposed improvement in vehicle
economy standards is so modest that it will divert investment from the
much bigger improvements in fuel consumption that could easily be
achieved if US consumers could be persuaded to drive lighter and
better-designed cars. The same could be true of “clean coal”
technology, which may well end up far less clean than its promoters are
contending and will deflect resources from nuclear and solar research.
What policies, then, should America have adopted and how could
President Bush’s successor improve on this week’s feeble start? The
answer is quite clear. What America needs is not arbitrary quantitative
targets — 35 billion gallons of ethanol, 10 per cent more fuel economy
and so on — but a set of incentives that will allow consumers and
businesses to make decentralised decisions on the behaviour changes and
new technologies that will work best.
The way to create such rational incentives is through a
well-regulated system of trading in carbon emission rights. A fully
global system of carbon trading — even if China and other developing
countries refused to participate, a system embracing just America,
Japan and Europe — would be infinitely preferable to the
Stalinist-style production quotas proposed this week by President Bush.
He appears to prefer a communist-style central planning to the
use of market-based incentives and prices. What an ideal opportunity
for Democrats to show that this supposedly pro-business President does
not even understand the rudiments of market economics.
It’s still true that while all of the above might be sensible, there’s a simple and easy step that can be taken without years or decades of international negotiation leading to an almost inevitable rejection by the Senate. Stick a $1 on the gas tax. Either reduce FICA or raise the income tax free allowance by the same amount. Tax bads, not goods.
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