Peter Barnes understands innovation through markets

There is a good article in U.S. News & World Report on Peter Barnes' Cap and Dividend proposal.  It differs from the existing proposed Lieberman-Warner proposal to Cap and Trade carbon emissions credits in that with Lieberman-Warner the energy companies are simply given carbon credits and then they trade them, whereas in Cap and Dividend a portion of the cost of the credits is returned to citizens as a dividend check each year.  There are estimates that a family of four would receive a check between $1,200 and $4,000 each year.  This would hellp compensate for higher energy prices; indeed, low energy users would come out ahead.

Moreover, the European system has been a disaster; it has increased energy costs while not reducing emissions and still giving energy companies unearned windfalls from a poorly designed government program - the worst of all possible worlds.

More importantly, Barnes comes out expicitly against incentives for clean energy or government programs "investing" in clean energy:

But in this system, you give the money to consumers instead of investing it in research on energy from sources other than fossil fuels.

I'm a retired businessman, and I believe obviously we need huge amounts of investments in new technologies and conservation and energy efficiency. But that's mostly going to happen in the private sector. It's not so much that we need public investments. We need to send a signal to the market to make the right investments. The market makes plenty of investments now, but they're the wrong investments.

This is exactly right; it should be considered Econ 101.  The government is incompetent to pick winners, but if you get the price signals right, then the private sector will discover what kinds of energy are worth investing in. 

I have a mild preference for Gore's proposal to exchange payroll taxes for carbon taxes, partly because economists I trust believe a tax approach would be less subject to abuse than cap and dividend, and partly because the payroll tax has rightly been described as "the worst tax."

That said, it is great to see Peter Barnes come out with such clarity on the issue of private investors directing investment dollars in the right direction once the price signals are corrected.  Quite aside from concerns about global warming, it has always seemed to me that dependence on foreign oil leads to a justification for a costly military and undesirable military intervention.

For those who are not already familiar with property rights solutions to tragedy of the commons problems, I recommend Barnes' Capitalism 3.0, a free download here.