Saturday, November 13, 2010

Why does Biden support Cap and Trade?

Vice President Joe Biden insists that government investment is what pushes technology forward, while people in my camp insist it's the free market and the quest for higher profits.

Regardless of who is right in that argument, I am confused as to why Joe Biden simultaneously holds that view and supports the cap and trade system to control greenhouse gases.

A central argument for cap and trade is it gives private companies an incentive to invent new technologies to reduce pollution. This is called a "performance standard," where companies are free to reduce emissions any way they can, as opposed to a "technology standard" where the government forces companies to use a specific approach.

Bruce Yandle explained that the requirement for catalytic converters in all automobiles to reduce emissions made Honda stop developing a rival technology. If instead Congress had used a peformance standard, Honda may have developed a superior technology, one they could sell to other automobile companies. But they didn't, so all companies must pay General Motors to use the catalytic converters they invented. They have no incentive to develop something better, so they don't.

So if Biden believes private companies don't find it profitable to sink money into research and development and invent new technologies, why on earth would he support a performance standard like cap and trade? Shouldn't he instead support funding specific technologies and forcing companies to use them?

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