Quick References: Cap and Trade vs. Carbon Tax

I posted earlier this month about quick reference sheets we’re putting together to cover points that we often discuss with with Hill staff and reporters. We just added some new ones, and I wanted to highlight a couple for you:

Again, I hope you also find these summaries useful, and we appreciate suggestions for additions and updates.

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  1. Posted February 25, 2009 at 2:22 am | Permalink

    I am not convinced that Cap and Trade is preferable to a carbon tax. Here’s why:

    1. Cap and Trade is difficult to apply to the transportation sector, particularly at the level of individuals choosing a vehicle and whether or how much to drive. In my region (San Francisco Bay area), transportation accounts for 50% of GHG emissions.

    2. As a price signal, Cap and Trade would also not trickle down well to individuals deciding how high to set their thermostat or whether to insulate their homes.

    3. Allocation of credits among GHG emitters is problematic: who deserves how much? Who should even be included in the capping program? I can envision endless arguments and lobbying on these points.

    4. With respect to innovation, a carbon tax could do just as well as Cap and Trade if the revenues generated by the tax were used for R&D and for grants/loans for upgrading industrial equipment or converting various business, transportation and manufacturing activities to low-GHG alternatives.

    5. A carbon tax is very easy to implement, because it would apply primarily to oil, coal and natural gas producers (although other large GHG sources should also be included: cement manufacturers, methane generation from landfills and dairies, etc.)

    6. There is presumably some price elasticity of demand for carbon, so that the tax could be increased to the point that total GHG emissions reach the desired level without a “firm cap”.

    7. Although the carbon cap could theoretically be based “purely on science”, there would be tremendous lobbying to choose a cap that is too high. Cap and Trade is not invulnerable to political pressure.

    8. OK, this might be paranoia, but the fact that industry supports Cap and Trade over a carbon tax makes me very suspicious!

  2. Posted January 17, 2010 at 3:13 pm | Permalink

    The IRS e-flie system is now open, most W-2s and 1099s will be in mail in the next couple of weeks. Is everybody ready for tax time?