Cap-and-Trade: What are the Odds?
Intrade is now giving 50:50 odds on the passage of a cap-and-trade scheme by the end of 2010. (20% for 2009). I’m not necessarily a huge believer in the wisdom of crowds, but they’ve done pretty well with election forecasting.
Note that there are some ambiguities about the “contract” being traded: “A cap and trade system for emissions trading to be established before midnight ET on 31 Dec 2010 in the United States.” Does it apply only to the passage of federal climate legislation or does it include a cap-and-trade system established by EPA under the Clean Air Act? And is it enough that the system has been authorized, or does the system have to reach some specific stage in implementation such as issuance of allowances? I’m guessing they meant that federal legislation would be passed by the critical date, but that’s not clear. Indeed, there’s even an interpretation under which this is now a sure thing: REGGI (a regional cap-and-trade system “in” the United States) is already up and running. Contract lawyers: take your marks, get set, go! (Note to colleagues: this wouldn’t make a bad exam question.)
Cara Horowitz
Ethan Elkind
Richard Frank
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Holly Doremus
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Timothy Malloy
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Jonathan Zasloff
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Eric Biber
Rhead Enion
Guest Blogger
Alex Wang
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Matthew E. Kahn
“…Intrade is now giving 50:50 odds on the passage of a cap-and-trade scheme by the end of 2010.(20% for 2009)…”
If the odds for passage of cap & trade are 20% in 2009 then the odds are likely to be less than 10% in 2010 – an election year.
Public support for cap & trade has never been strong and what little remains continues to dwindle. There are very few places left in America, outside of California, where a candidate who openly advocates cap & trade could get elected.
China, India, Russia, Brazil, and other developing nations have refused to cut their carbon dioxide emissions, and members of Congress who are running for re-election know they should distance themselves from this issue in 2010.
This is why I believe that the odds for passage of cap & trade are less than 10% in 2010. If Democrats continue to control the House and Senate after 2010, then the odds may improve in 2011.