As I showed this morning, the Obama Administration’s new fuel economy standards result in an expected emissions reduction of about 46 million tonnes of carbon dioxide per year. Since the implementation fuel economy policy will have occurred (assuming it does indeed go forward) prior to the passage of Waxman-Markey, shouldn’t this imply that the emissions allowances in the Waxman-Markey bill should be reduced by 46 million tonnes per year? After all these emissions will no longer occur and thus no longer need to be reduced.

If the allowances are not reduced, then the cap and trade program will have 46 million extra allowances per year that might have seemed to be necessary yesterday, before we learned of the fuel economy policy, but are not needed today since those reductions are already “on the books”. And with 46 million extra allowances, the cap and trade program, ironically enough, will allow extra emissions exactly offsetting Obama’s fuel economy program, making its net effect on emissions reductions just about zero.

Cap and trade has all sorts of interesting outcomes. There will be more.