On Monday, the WSJ ran a great editorial on who really pays for cap and trade schemes.

Today, in the letters section, a response from Dallas Burtraw and Richard Sweeney of Resources for the Future:

Your March 9 editorial “Who Pays for Cap and Trade?” offers readers a bait-and-switch argument to assert that carbon cap-and-trade regimes would take from “working class” America and give to “affluent” citizens.
The editorial correctly notes that the cost of the cap would be borne mainly by consumers, not producers. It then includes a chart showing a large disparity in per capita emissions between states. But it fails to point out that the data relate to economic production, not consumption. This is a big mistake. Every household in Wyoming would have to pilot a private jet to reach carbon consumption of 154.4 tons. The truth is that while there is some variation in the carbon intensity of consumption across states, it is orders of magnitude smaller than what the editorial claims, thus severely overstating the degree to which cap and trade will burden some states and benefit others.

And in response, a slap-down from the editors at the Journal. An excerpt:

We don’t mind an intellectual fight, and in a nearby letter, two economists at Resources for the Future take aim at our Monday editorial on how the costs of cap and trade will be distributed across regions and income groups. Dallas Burtraw and Richard Sweeney call it “a bait-and-switch argument.” Mr. Sweeney added on his blog that “The Wall Street Journal is an idiot.”
That’s how the global-warming clerisy debates these days, but we’ll try to take their argument seriously. They claim that by citing state-level CO2 production data, rather than CO2 consumption data, we exaggerated regional differences. This is distortion disguised as verisimilitude.
It’s true that discrepancies in per capita emissions — 73 tons in West Virginia versus 12 tons in Rhode Island, for instance — reflect the fact that carbon-heavy power plants and industries are based in some states and not others. It’s also true that electricity crosses state lines, and that — as cap and trade raises prices — a consumer in California who buys a car built in Michigan, say, will bear some of its carbon costs.
However, one reason we didn’t mention per capita consumption figures is that, strictly speaking, they don’t exist. The economic literature on the incidence of cap and trade extrapolates carbon consumption by region from the government’s Consumer Expenditure Survey. But nearly every human activity has some carbon cost associated with it. Consider the emissions of “consuming” french fries at a fast food restaurant:
There’s CO2 in fertilizing and harvesting the potatoes; processing, freezing, then transporting them; and still more when they’re cooked. Now multiply that by the entire economy. One danger of a carbon tax — especially if it is poorly designed — is it that its costs will ripple throughout complex energy chains in ways that economic modeling can’t quantify.