Feature or bug?

Greg Mankiw says that Waxman-Markey’s customer rebates are a bug, not a feature as Paul Krugman claims. But this is easily remedied with a lump-sum rebate, rather than lower prices (a nice trick which has interesting potential elsewhere in the realm of energy efficiency, and also bears some similarity to cap-and-dividend).

Felix Salmon gets it, noting that a flat refundable tax credit avoids the problem. He adds that it's hard to avoid generating any unequal results:
Even that, however, would create inequities: three college roommates sharing a small city apartment would get three times the amount going to a single mother trying to raise three kids in the countryside — someone whose energy consumption would naturally be much higher.

There isn’t a simple and fair way of doing things — even channeling fixed payments through the energy companies themselves would unfairly advantage people who use say electricity and natural gas and heating oil. Instead, I fear that the fair method is going to be complicated, based on ZIP codes and size of household at the very least.
Yes, it's hard to get it perfect, but Mankiw's original argument is easily refuted.

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