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Carbon Tax vs. Cap and Trade

I don't believe man-made global warming is substantial enough or catastrophic enough in its effects to warrant expensive public action.  But if we did feel the need to do something, John Tierney echoes a theme I have been sounding for a while (emphasis added):

The CBO report concludes that a tax on carbon emissions “would be the most efficient incentive-based option for reducing emissions and could be relatively easy to implement. If it was coordinated among major emitting countries, it would help minimize the cost of achieving a global target for emissions by providing consistent incentives for reducing emissions around the world.” But the major presidential candidates aren’t supporting such a tax, and the few proposals on Capitol Hill to impose a tax are not expected to go anywhere anytime soon.

Instead, the candidates and most legislators prefer to talk about cap-and-trade schemes like the Kyoto protocol. These schemes have the great political advantage of hiding the costs from consumers and voters, but they cost more and accomplish less. The CBO calculates that the net benefits of a tax would be five times higher than for a cap-and-trade with inflexible targets. A more flexible cap-and-trade system wouldn’t be quite as bad a deal economically, but it would create all sorts of political temptations for doling out exemptions and subsidies to well-connected industries and companies.

Posted on February 18, 2008 at 09:58 AM | Permalink


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