Windfall entitlements

There is an interesting piece in the Irish Times today.

Carbon dioxide emission permits are given away for free (grandparented) to electricity companies. This is a transfer of property from we the people to the shareholders of those companies. This has been going on for a couple of years, but no one protested too loudly.

The government has now introduced a new tax on the value of grandparented permits, and the regulator has ruled that this new tax cannot be passed on to electricity consumers. This is a good approximation to the preferred solution of auctioning permits.

Hat tip to Minister Ryan, so.

Of course, there is the law of unintended consequences. First, there was the PSO levy. Now, private companies argue that what once was a windfall profit, now is part of their regular return to capital.

The verdict will be interesting. Will the judge reason from a 2007 perspective, which has that the companies enjoyed a windfall for three years, which the government now ends? Or will the judge adopt the 2010 perspective, which has that the companies have a reasonable expectation for an income stream (based on the current position of the European Commission and the position of the government until only a few months ago) which the government capriciously removed?