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07 May 2009

Putting a Price on Carbon: An Emissions Cap or a Tax?

The days of freely dumping greenhouse gases into the atmosphere are coming to an end, but how best to price carbon emissions remains in dispute. As the U.S. Congress debates the issue, Yale Environment 360 asked eight experts to discuss the merits of a cap-and-trade system versus a carbon tax.

A broad spectrum of people concerned about global warming and U.S. energy independence agree on one basic truth: Sooner or later, emitting planet-warming greenhouse gases is no longer going to be free. Whether it comes this year, or next, or in five years’ time, legislation imposing a price on burning fossil fuels seems all but inevitable.

Any law that places a price on carbon must achieve two basic and interrelated goals: discouraging — with increasingly painful economic consequences — the use of oil, coal, and natural gas, and encouraging the development of renewable sources of energy. Two paths to this end have been proposed. The first is a cap-and-trade system, which would place progressively stricter limits on fossil fuel use; require power plants, industries, and other major sources of greenhouse gases, to purchase permits to discharge carbon dioxide; and establish a market in those permits. The second is an outright tax on fossil fuels. Proponents of both methods say the economic hardship created by higher energy prices could be offset by rebates to taxpayers.

The cap-and-trade option has attracted far more attention and has many more supporters, including President Obama, key Congressional leaders, and an influential coalition of environmental groups and big businesses, including General Electric, Dow Chemical, Shell Oil, and Duke Energy. Congressional leaders say they hope to pass a cap-and-trade bill by year’s end, but whether they can achieve that goal remains a major question.

Supporters of cap-and-trade argue that it has two main strengths. It sets a steadily declining ceiling on carbon emissions, and, by creating a market that rewards companies for slashing CO2 (corporations that reduce emissions below their allotment can sell them on the open market), it uses the free enterprise system to wean the country off fossil fuels and onto renewable energy. Proponents of a carbon tax say their plan has one overriding benefit: Its simplicity. They contend that by imposing a predictable and steadily increasing levy on fossil fuels, the carbon tax will also drive development of alternative sources of energy.

Yale Environment 360 asked a number of environmentalists, economists, and academics to explain which approach – cap-and-trade or a carbon tax – they preferred. There was disagreement on many points, but on one issue most concurred. As Jeffrey D. Sachs, director of the Earth Institute at Columbia University, said, imposing some sort of price on fossil fuels “is a big improvement over the do-nothing status quo.”

Here are their responses:

Frances Beinecke | Jeffrey D. Sachs | Fred Krupp
Roger A. Pielke Jr. | Robert N. Stavins | Charles Komanoff
Eileen Claussen | Baruch Fischhoff

Frances Beinecke
Frances Beinecke, president of the Natural Resource Defense Council.
A carbon cap is a more effective approach to solving global warming than a tax. First and most importantly, it sets a clear goal for emissions reductions. With a tax, we are guessing about how much it will reduce carbon emissions, and it may not be sufficient to change the course of global warming. A declining cap gives you firm reduction targets and a system for measuring when you hit them.

Second, we have on-the-ground experience in curbing global warming pollution from cap programs, while the tax model remains entirely untested. Caps are already being used in the European Union and in 10 Northeastern states. They are underway in California. Both the President and Congressional leaders are focused on cap-and-trade. Despite the bubble of pundit interest, there is very little support for a carbon tax among our nation's legislators.

Some advocates claim that a tax would be simpler than a cap. But Congress does not write simple tax bills. When it gets converted into reality, any tax legislation will be complex and vulnerable to loopholes. In 1993, the BTU tax was killed after industry lobbied successfully for a bunch of exemptions, and then cynically lobbied to end the whole thing because it was full of loopholes. One clever lobbying firm went as far as sending blocks of Swiss cheese to members of Congress.

In the end, the discussion about a carbon tax is a distraction, because it frames the debate in fiscal policy terms — How high should the tax be? What should be done with the revenue? — instead of focusing on how quickly we need to reduce global warming pollution.

The crisis of global warming is so urgent that we can’t wait for lawmakers, industry, and the American people to spend years hashing out the details of an entirely new system. We have to act now to reduce emissions, and a declining cap is the way to do it.


Jeffrey D. Sachs
Jeffrey D. Sachs, director of the Earth Institute at Columbia University.
Cap-and-trade emissions trading seems to politicians to be the ideal solution. It is “market-based,” does not require the T-word (taxes), and can be worked out with special-interest groups in back-room negotiations. For the rest of us, however, cap-and-trade seems a funny way to do business.

A straightforward carbon tax has vast advantages. It can be levied upstream at a few dozen places — at the wellhead, the mine face, and the liquid natural gas depot — rather than at thousands or tens of thousands of businesses. A carbon tax covers the entire economy, including automobiles, household use, and other units impossible to reach in cap-and-trade. A carbon tax puts a clear price on carbon emissions for many years ahead, while a cap-and-trade system gives a highly fluctuating spot price. A carbon tax raises a clear amount of revenue, which can be used for targeted purposes (R&D for sustainable energy) or rebated to the public in one way or another, while the revenues from a cap-and-trade system are likely to be bargained away well before the first trade ever takes place.

It’s sometimes claimed that cap-and-trade will lead to more certain emissions reductions than a tax. In theory this could be true, but in practice it’s likely to be false. In fact, a cap-and-trade system can be more easily manipulated to allow additional emissions; if the permits become too pricey, regulators would likely sell or distribute more permits to keep the price “reasonable.” Since the long-term signals from cap-and-trade are less powerful than a multi-year carbon tax, the behavioral changes (e.g. choice of the type of power plant) brought about by cap-and-trade could well turn out to be far fewer, as well.

Let me be clear, though. Cap-and-trade is a big improvement over the do-nothing status quo, even if it’s less desirable than a carbon tax. If politicians insist on cap-and-trade, we shouldn’t let the best be the enemy of the good.


Fred Krupp
Fred Krupp, president of the Environmental Defense Fund.
President Obama got it exactly right when he called on Congress for a market-based cap on greenhouse gas emissions “to truly transform our economy, to protect our security and save our planet from the ravages of climate change.”

From an environmental point of view, the advantage of an emissions cap over a carbon tax is clear: A cap puts a legal limit on pollution. A tax does not. Guessing what level of tax might drive the pollution cuts we need to avert runaway climate change is a risk we simply can’t afford to take. Only a cap with strong emissions reduction targets — and clear rules for meeting them — can guarantee that we achieve the environmental goal.

Cap-and-trade also has the upper hand on the economics. When we create a market that rewards emissions reductions, we put the vast know-how, manufacturing base, and investment capital of the private sector to work. Nothing can match the immense resources that the private sector can bring to bear — and nothing beats a cap when it comes to driving sustained investment in the jobs and technologies that will solve the problem.

We know from the EPA that cap-and-trade will mean as little as $98 a year — about a dime a day — for American households. Those costs are small, but they are real. Fortunately, Congress has options for ensuring that the cap is equitable and that consumers are treated fairly as the country makes the long-term transition to a low-carbon economy. President Obama has proposed putting revenue generated by the auction of emissions allowances back into Americans’ wallets. The U.S. Climate Action Partnership, of which the Environmental Defense Fund is a member, has a blueprint for legislation that would enable regulated energy suppliers to offset costs for consumers.

The bottom line is that cap-and-trade gives us an affordable environmental guarantee that you can’t get with a tax. The dime a day we’ll spend is the hardest working dime in America: It cleans the air, reduces our oil dependence, creates jobs, and averts a looming environmental crisis.


Roger A. Pielke Jr.
Roger A. Pielke Jr., professor of environmental studies at the University of Colorado.
Cap-and-trade is doomed to failure. It might lead to some new and substantial revenues for the government, but it can never succeed at limiting carbon dioxide emissions. The reason is very simple: A hard cap on emissions would inevitably lead to increases in the costs of energy, which will lead to increasing costs throughout the economy. If these costs are felt by consumers (which is of course what such a policy is designed to do) then they will complain. No elected official will want unhappy constituents, so they will work hard to help people avoid the increasing costs. This fundamental political reality will consequently turn the theory of a hard cap into the practice of a very soft cap that has backdoors and safety valves that allow the cap to be evaded in order to reduce the effect on costs, ultimately defeating the purpose of the policy.

Putting a price on carbon, however, makes good sense. A straight carbon tax — at whatever level would be politically acceptable — is a far better place to start than with a fully gamed cap-and-trade system. The point of such a tax would not be to change behavior, but to start the process of pricing carbon directly and to raise some significant revenue for clean-energy investments. Some experts suggest that $5-per-barrel oil tax would not be noticed by consumers but would raise $500 billion over five years to fund investments in a new green economy.

With progress in de-carbonizing the economy, a steadily rising carbon tax should be politically possible, thereby creating a virtuous circle where the price of carbon rises with — and reinforces — progress made in increasing energy efficiency and expanding the role of carbon-neutral energy sources. With Exxon Mobil supporting a low carbon tax, I reject the contention by some who argue that a carbon tax is politically impossible.

Cap-and-trade is a big, fat political mess that cannot succeed in reducing emissions, but can lead to lots of benefits to many special interests. Hence it has many champions. A straight carbon tax, applied upstream in the energy economy, is a much preferable approach to help bring about the long-term de-carbonization of the global economy.


Robert N. Stavins
Robert N. Stavins, Albert Pratt Professor of Business and Government at Harvard University and the Director of the Harvard Environmental Economics Program.
While there are tradeoffs between the two principal market-based instruments targeting CO2 emissions — cap-and-trade and carbon taxes — the best and most likely approach for the short- to medium-term in the U. S. is a well-designed cap-and-trade system.

There are differences between taxes and cap-and-trade that need to be recognized. First, environmental effectiveness: A tax does not guarantee achievement of an emissions target, but it provides greater certainty regarding costs. On the other hand, political and economic forces strongly point to less severe targets if carbon taxes are used, rather than cap-and-trade — this is not an acceptable tradeoff, and this is why environmental NGOs are opposed to the carbon-tax approach.

In principle, both carbon taxes and cap-and-trade can achieve cost-effective reductions, and — depending upon design — the issue of who ultimately pays for the higher price placed on carbon can be similarly resolved in both approaches. But the key difference is that political pressures on a carbon tax system will most likely lead to exemptions of sectors and firms, which reduces environmental effectiveness and drives up costs, as some low-cost emission reduction opportunities are left off the table. Political pressures on a cap-and-trade system will lead to different allocations of allowances, which affect distribution, but not environmental effectiveness and cost effectiveness.

Proponents of carbon taxes worry about the propensity of political processes under a cap-and-trade system to compensate sectors through free allowance allocations. But a carbon tax is sensitive to the same political pressures, and may be expected to succumb in ways that are ultimately more harmful, thus reducing environmental achievement and driving up costs.


Charles Komanoff
Charles Komanoff, co-director of the Carbon Tax Center.
A cap-and-trade system helped curb sulfur emissions and lessen acid rain. But by any measure, the task of reducing carbon emissions and averting climate catastrophe will be orders of magnitude more massive.

Decarbonizing the world’s energy systems will entail scaling up hundreds of innovative technologies, some of which don’t yet exist, as well as rewiring humanity’s ecological consciousness. Only a carbon tax can quickly drive the across-the-board transition from fossil fuels to renewable and efficient energy. Its key attributes make it far superior to cap-and-trade:


“The American people want us to level with them,” Rep. John B. Larson (D-CT.), said in March. “We create price certainty without any new bureaucracies or complicated auction schemes.” Larson, a member of the House leadership, is looking to meld traditional American pragmatism with a newly resurgent idealism. His bill, and carbon taxing, deserve our support.


Eileen Claussen
Eileen Claussen, president of the Pew Center on Global Climate Change.
An economy-wide greenhouse gas cap-and-trade system sets a clear limit on greenhouse gas emissions and minimizes the costs of achieving this target. Environmental integrity and cost-effectiveness are two critical advantages that make cap-and-trade the right policy mechanism to tackle climate change in an economically responsible manner. Complementary measures and incentives — including for coal, transportation, technology commercialization, and buildings and energy efficiency — are also necessary pieces of the climate solution.

Unlike traditional regulation, a cap-and-trade program constrains emissions but lets market forces set a price on emissions. Rather than mandating a specific technology, the flexibility afforded by emissions trading markets helps identify where emission reductions can be achieved most cost-effectively. Cap-and-trade stimulates the development of new technological solutions that can enable much deeper emissions cuts at lower cost in the future.

A carbon tax is often presented as a main alternative to cap and trade. A core difference between these approaches involves the issue of certainty. A tax provides cost certainty by setting a fixed cost on emissions, whereas cap-and-trade delivers emissions certainty by establishing a declining emissions limit based on an assessment of the reductions level required to protect the climate. In contrast to a cap-and-trade approach, a tax would not provide the same level of emissions certainty during any given compliance period.

An economy-wide cap-and-trade policy is supported by President Obama, by Congressional leaders drafting bills in the House and Senate, and by the 25 major corporations and 5 NGOs working together as the U.S. Climate Action Partnership. Greater flexibility to achieve emissions reductions in a cost-effective manner and greater certainty that environmental objectives will be met are key advantages of a cap-and-trade policy.


Baruch Fischhoff
Baruch Fischhoff, Howard Heinz University Professor of Social and Decision Sciences and Engineering and Public Policy at Carnegie Mellon University.
I favor a well-designed, comprehensive national energy policy, comprised of simple components, such a revenue-neutral energy tax.

A national energy policy with simple components would focus on easily understood outcomes, such as reducing environmental damage and improving industrial efficiency. It would reward innovation in engineering, rather than in designing financial and legal instruments. It would be transparent and trustworthy. It would favor a simple carbon or energy tax over a complex cap-and-trade program. Such a tax has clear goals (e.g., use less energy) and direct responses (e.g., adopt efficient technologies). It should even have simpler loopholes, such as giving special interests explicit exemptions, rather than giving them unfair portions of the capped allowance of permissible energy consumption.

A comprehensive national energy policy would create pressure to look for common ground that allows the players to support one another’s programs. It would provide politicians with the cover that complex options can offer: “I’m supporting subsidies for nuclear power, but I’m getting aggressive energy conservation, focused on low-income families.” It would signal to the public just how big the problems are.

Designing the best simple, comprehensive policy will require analytical and empirical research. For example, electricity-pricing programs will need rigorous pre-tests and field evaluations, along with tariffs providing appropriate incentives for utilities to reward their customers’ energy conservation. Energy-saving products will need intensive usability tests. Political leaders will need clear, nuanced descriptions of the public's desires, free from pundits' interpretations and opinion polls’ simplifications. Such descriptions can come from intensive interviewing and case studies of experiences like British Columbians’ responses to the province’s revenue-neutral carbon tax and Americans’ responses to our complex, fragmented financial bailout.

I predict that a well-designed, comprehensive, simple energy policy would convince many individuals that its proponents are serious about addressing the energy-and-environment problem, not using it as an excuse to do more favors for special interests.

ABOUT THE AUTHOR




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COMMENTS


In addition to a revenue-neutral carbon tax and a traditional cap and trade system, there is a third approach — cap and dividend — that combines the best features of each in a politically attractive way.

The key elements of cap and dividend are: (1) an upstream cap on the first sellers of fossil fuels; (2) 100% of permits auctioned; and (3) all or most auction revenue returned to citizens on a per capita basis. Trading of actual permits could be allowed, but there would be no offsets.

Like a revenue-neutral carbon tax, cap and dividend has the virtues of simplicity, economy-wide coverage, and protecting households against the impact of rising energy prices. And like a traditional cap and trade system, it has the virtue of physically limiting emissions (more so, actually, since there are no offsets).

Cap and dividend legislation has been introduced in the House by Rep. Chris Van Hollen, and will soon by introduced in the Senate by Sen. Maria Cantwell. It could be the way to break the current political logjam on climate policy.
Posted by Peter Barnes on 07 May 2009


Environmental policy can be shaped by tax rules, and from my point of view as a tax lawyer, I believe that a carbon tax would seem much simpler to implement and to adjust — if a carbon tax did not produce the desired results in terms of reduced emissions, the rate could be increased or adjusted quite easily. A carbon tax also doesn't raise a whole new range of legal issues that we haven't seen before.

A cap and trade approach, on the other had, presents a number of issues that need to be addressed: first, what happens with the initial allowances-- will they be distributed for free or auctioned off? (The Waxman-Markey bill didn't answer this question). A cap and trade approach will create a new market, including a market for derivatives — who will oversee this market (which will likely be a global market)?

Finally, we will need to develop a new system of tax rules to address the taxation of these allowances, how buyers of allowances will treat the cost of acquisition, how the initial allowances will be taxed, etc.

So, while cap and trade doesn't include the word "tax", no doubt tax rules will be a key aspect of a cap and trade approach, and rules will need to be developed to address a range of issues on the taxation of these instruments.

One way to put the difference between the two systems is that one (cap and trade) in theory provides certainty on environmental benefit, the other (carbon tax) provides certainty on cost. Both approaches should be capable of being adjusted to deal with either of these points, but a carbon tax seems easier to adjust. Furthermore, since this is a global issue, but costs are going to be local (ie, any US policy will affect companies in the US) an approach that provides more certainty on cost may be better.

Maybe this is why China is reportedly engaging a study on carbon tax (see http://blogs.wsj.com/environmentalcapital/2009/05/01/is-china-toying-with-a-carbon-tax/

The momentum appears to be strongly in favor of cap and trade at the moment, and clearly we do need to do something. But the alternative carbon tax approach may greater consideration.
Posted by Elizabeth Kessenides on 07 May 2009


Good discussion, but I fear that it falls into a trap of framing the argument around the wrong set of choices. Cap & Trade vs. Carbon Tax debates are like Coke vs. Pepsi debates: Passionate, and occasionally interesting, but by no means the universe of policy options (or even the best subset thereof).

The more important question, which far too often gets asked is what protocol will lead to the fastest, cheapest and most permanent reduction in CO2 emissions? Given the massive reallocation of capital that must accompany such reductions, that question can be reframed as "what options will maximally encourage investment in low/zero/negative CO2 technologies?

The gross failure of any system that sends $ back inside the beltway for redistribution - which is absolutely true of carbon taxes, and unfortunately true of most policies that are presented as "cap & trade", notwithstanding the headline - is that they fail to provide that incentive to invest. Any business owner knows that they don't get to raise their prices or justify new investments just because their competitors got fined. And yet every discussion of carbon policy is framed as if a price on carbon emissions will naturally translate into an investment thesis for carbon reduction. It ain't so.

In theory, a cap & trade system fixes that, as sources and sinks can enter into bilateral agreements and give carbon sinks long-term incentives to invest. Unfortunately, whether Lieberman-Warner or Waxman-Markey (or even Kyoto or RGGI), the things we call C&T really aren't; sources pay, but the payments get transferred through various government bodies before being distributed to various elements of the economy, many of which have nothing to do with CO2 reduction (adaptation funds, for example). Cap & Dividend is only the most egregious example of this approach - but the result of all these is consistent: A ton of emissions costs more than a ton of reduction saves, causing a massive misallocation of capital, and failing in the basic goal of quickly, cheaply reducing CO2.

We can do better - but not without reframing the conversation.
Posted by Sean Casten on 07 May 2009


The only way we can succeed with the massive challenge of restructuring our energy system to avoid catastrophic climate change is to make "going low carbon" the best way to make money in the whole economy. Ultimately, this is the purpose of both cap-and-trade and a carbon tax.

I favor cap-and-trade, even after factoring in the legitimate concerns of its critics. Why? I doubt the effectiveness of a carbon tax. Remember how the price of gasoline increased from $1.50 in early 2001 to $4.00 in summer of 2008. This was equivalent to a $250 per gallon CO2 tax, which is way above the level that anyone contemplates for a carbon tax. The result: gasoline consumption — and resulting GHG emissions — increased by 10 percent!

Energy is a very inelastic commodity, and I'm not comfortable betting the future of the planet on consumer price response. While cap-and-trade's critics sometimes chastise it for being "market based," it is a carbon tax that truly relies on the "wisdom of the market" — consumer price response — for its environmental effectiveness.

However, we need to ensure that cap-and-trade is effective in driving funding to mitigation. For example, in the electric sector, our top priority technologies are efficiency, renewables, and cogeneration. If we design an electric sector cap-and-trade by capping generators, money will not flow from generators to these end user technologies. Their benefits accrue broadly over the power grid, and cannot be traced back to a single generating plant. Therefore, that generating plant would not be likely to fund these technologies. If it did, only a minute fraction of the reductions would occur at its own smokestack, while the vast majority of the reductions would occur at the smokestacks of its competitors.

If we implement a generator cap, we will either have to 1) auction allowances to get funding to flow to efficiency, renewables, and cogen, or 2) implement parallel policies such as system benefit charges and renewable portfolio standards to drive funding into these top priority technologies.

An alternative is a load-based cap. Under this approach, the utility is capped instead of the generator. The utility can run programs to fund efficiency, end-use renewables, and cogeneration, and these, as well as grid-based renewables, all help it meet its cap. The financial interest of the capped entity is aligned with the interest of its customers in reducing energy use. This presents a way of driving funding into these sectors without establishing a gargantuan government program for spending auction proceeds.

A further advantage of capping utilities is the fact that they are regulated, either by public utility commissions or by elected boards. Our recent experience with an underregulated Wall Street has caused enormous pain. Any potential windfall profits — and there likely will be considerable under a generator cap-and-trade — would be subject to regulation and recovery for the benefit of the public. A generator cap privatizes these windfall profits, puts them out of the control regulators, and allows them to escape recovery.

So cap-and-trade is better than a carbon tax, but certain designs must be employed to ensure that capital flows to efficiency, renewables, and cogeneration.
Posted by Mike Burnett on 07 May 2009


Im puzzled. Why is a carbon tax so impossible, while a cap and trade (I almost wrote crap and tirade) is so doable? The cap and trade advocates above all admit carbon prices will rise, as they should. But how much they rise is not known. While the quantity of CO2 emitted if a tax were put on is not known it is pretty certain that with rising taxes, CO2 emissions will fall more and more from their rising, no tax baseline. So what is worse, not knowing the quantity or not knowing the price?


How many times a year will carbon users - called polluting industries -- have to go to the market for permits? How will households and drivers and air lines and office buildings participate? Every year manufacturing's share of emissions shrinks slightly while those for transport, homes, and services increase (including these sectors' shares of electricity production), so more and more of the carbon emissions fall to smaller and smaller lumps of consumption, yet must be addressed.

In the end, which system can be more manipulated — a cap system or a tax system? And which system do we want to live with for the next hundred years? No reasonable person believes that this is a short term fix, because the economy itself needs decades to change.

Each approach has advantages and disadvantages, but only a system that raises the price of carbon for all, no exceptions, is going to squeeze emissions out of the system.

The question is why a cap and trade system cannot be applied at the top of the carbon chain to those who produce, sell, or important carbon laden fuels. Let them, not individual users, bid for permits and fight it out, and let the market do the rest with higher cost carbon

Lee Schipper,Ph. d
Stanford and UC Berkeley
Posted by lee schipper on 08 May 2009


I do think you missed something in how you framed this conversation. By focusing the discussion around Cap & Trade v. Tax, the issue became more complicated than necessary. The real question is: Cap & Auction, Cap & Giveaway or Carbon Tax?

Capping upstream and auctioning 100 percent of the permits would create the certainty many tax advocates worry about.

Posted by Sam on 08 May 2009


Like illusion is the symptom of drug abuse, CO2 emissions are the result of fossil fuel abuse. Accompanying by the rapid lift of our living standard, we are unconsciously addicted to fossil energies. Bit by bit, we went down the road further and further. Today, it is crystal clear that we are at a crossway: to walk ahead or to make a turn. As many scientists have proven that the end of road is a chasm, the only option left for us is to make a turn. Thanks the effort made by those great economists, environmentalists and politicians like John Dale, Al Gore and many others, to just name a few. We now have two options in front of us: the left is Carbon Tax and the right is Cap-and-Trade. Which direction shall we make a turn?

Dozens of industry moguls like the CEO of Exelon and some popular columnists like Thomas Friedman all reckon on Carbon Tax. This not hard to understand. As a tax, it is indeed a price ceiling on per unit of CO2 emissions once the government fixed the rate of Carbon Tax. Consequently producers can either invent new technologies to low down the cost of production or simply pass on the additional cost to consumers. Well, the former response will not reduce the products supplied in the market which means CO2 emissions will at least keep steady unless the government recognizes the problem and then raises the tax rate. Unfortunately it is too difficult for the government to deliberately understand cost behaviors of products. This is because the market is a dynamic place where massive suppliers and consumers make decisions based on uncertainties they faced or expected or predicted. It is damn hard to precisely predict which direction will the market move in next second, otherwise those Wall Street people may not need behave greedily on their bonus and fat packages. Due to this uncertainty, it is doomed a failure that trying to harness the market no matter you are as powerful as the government or as agile as Warren Buffet or George Soros. Therefore, it is impossible for the government to set an appropriate tax rate which reflects the real social and economic cost of that specific product at that specific time slot.

In fact, Carbon Tax may decrease the production because raising price (it equals to original fossil fuel price plus a tax) will decrease quantity demanded in the market. However, this quantity decrease is insignificant since the most of products we need necessarily are unfortunately energy intensive and our demand to these daily necessities are highly price inelastic. The hope is still there as if consumers may change their taste on energy-hungry products, but the dilemma is it requires a long period to shift gradually. Frankly speaking, this is the most plausible approach to hammer the puzzle we face now. However, the fact is we do not have sufficient time to see that shift happens since we have missed so many opportunites before. It is just too luxury to imagine you have magic power while your house is burning. Clearly, Carbon Tax is not a realistic solution.

On the contrary, Cap-and-Trade sets a cap on CO2 emissions as it acts as a quantity ceiling. It is obviously benign to our environment since we will have a red tape (cap) there. It is also a scientific way to reach our target—450 ppm (CO2 density in the atmosphere) on the other hand. The logic is once a country set a line, this country at least can guarantee itself fulfills obligation to the environment at the beginning. No matter what counter-moves will other countries take, this is a responsibility that a leader shall bear. There are some doubts on how Europeans playing a carbon offset trick with dubious CDM (Clean Development Mechanism, a part of Kyoto Cap-and-Trade system among developed countries and developing nations) projects around the world. Yes, nothing comes for nothing, there might be some imperfections during the start of European’s effort, but the point is not to what degree but to which direction. Critize is easier than act as nobody can deny it. We have to always remember that the purpose of our journey is—to curb CO2 emissions and then to slow down Global Warming. We have to trade off between the cost and the result. After Katrina, we know we shall emphasize on the result than on the cost. Once there is a cap on CO2 emissions and an effective system to enforce the reductions, a shrink cap year after year will ultimately leads us closer to our target. It is an action schedule based on scientific studies rather than a compromise which satisfies all human stakeholders. As we experienced, a good (realistic) schedule usually results in a well-done performance.

Meanwhile, the part of trade can encourage the innovation not only on technology but also on fossil fuel addiction relief. Once there is a market, the imminent power of invisible hand can conduct resources automatically toward our best interest. As we have enjoyed magnificent merits of the free market, we shall not doubt it could help us again to win this battle. In addition, Cap-and-Trade is not a duplicate brand from the Wall Street. The difference is that the “cap” sets a tone in the concert, all market forces have to play under this frame, no maybe, no but. Therefore, Cap-and-Trade can avoid future chaos brought up by a weak regulated “free” market. The Wall Street nightmare will never be repeated in Cap-and-Trade system if we have a realistic schedule and appropriate enforcement.

In sum, Carbon Tax and Cap-and-Trade are all taxes in terms of economics. Nonetheless, there are varied forms of Carbon Tax and Cap-and-Trade. There will be a huge difference with regard to which side of market they were imposed. A Carbon Tax on consumer side will have a very different outcome versus the one on producer side. The same applies to Cap-and-Trade. There are also different opinions about a mixture solution which takes advantages of both ideas and avoid their drawbacks at the same time. It sounds like a brilliant and convenient invention to unleash the knot we face. However, there are at least four possibilities: both on consumer side, both on producer side, one on consumer side and the another on producer side, and the other way around. In any case, unlike Carbon Tax requires longer time to take effect and also increases the burden of the government in both tuning and collecting, Cap-and-Trade takes full advantages of the market, that is to say, less transaction costs. This is indeed a fundamental variance between the visible hand and the invisible one. In a nutshell, they are all bitter medicines that we have to swallow, but a sugar-coated one is probably preferred, I guess.
Posted by Feng Wang on 08 May 2009


Jeffrey Sachs makes a good point that "we shouldn't let the best be the enemy of the good." The discussion seems to boil down to a question of what policy we can get through congress without it getting too distorted and diluted along the way. But what about after that? Whatever we pass will need to get strengthened later, especially since the climate seems to be changing faster than anyone was planning on. Is it easier politically to increase a tax or issue fewer allowances? Or will whatever price we get, combined with complimentary policies to spur research and investment, make the benefits of shifting away from carbon so obvious that no-one will oppose accelerating the transition?
Posted by Ian Hough on 08 May 2009


I think Sach's argument is weak, until the very last part, which is quite sensible:

"Let me be clear, though. Cap-and-trade is a big improvement over the do-nothing status quo, even if it’s less desirable than a carbon tax. If politicians insist on cap-and-trade, we shouldn’t let the best be the enemy of the good."

Given that we have Waxman-Markey, and there's no carbon tax bill in the works (as far as I know), it's good enough for me.
Posted by BCC on 08 May 2009


First of all, thank you hosting this incredibly important discussion. After “listening” to your distinguished group of opinion leaders, it’s clear that there is room for even more debate on the relative merits of both cap and trade and a revenue-neutral carbon tax. And while we at the U.S. Climate Task Force (CTF) believe that a revenue-neutral carbon tax is superior to a cap and trade system for a number of reasons, we believe that it is even more important that we have a full and open debate on the subject. The bottom line is that we need to put aside political expediency and work with scientists, economists and opinion leaders to deliver workable climate change legislation based on merit. And that starts with a willingness to explore all the options, not just the easy ones.

Having said that, CTF advocates that a carbon tax shift approach is the best way to mitigate global climate change. In contrast to a cap-and-trade, this approach would produce no additional price volatility, create no new financial instruments to trade and speculate on, because this policy is predictable and transparent. It would also be relatively simple to administer and enforce. And it can be designed to recycle its revenues in payroll tax reductions or rebates. In this way, the carbon tax would change the relative price of different forms of energy, based directly on its carbon content, while protecting people from the additional, direct costs of the tax itself.

For years, many politicians and environmental leaders have believed that any kind of tax to deal with climate change would be dead on arrival. That may be changing, especially if the tax is paired with rebates to protect working families. It is important that our leaders take steps to address climate change, but Congress should carefully weigh the risks and benefits of all potentially viable emissions policies — including a carbon tax.
Posted by CTF on 08 May 2009


David Roberts at Grist does great work on this matter, as does Joe Romm.

http://www.grist.org/article/2009-05-08-carbon-tax-vs-cap-and-trade/

Basically, both can be gamed/weakened by actors with influence, both are complex in the form that they are likely to be implemented, both CAN work, just in different ways....but only one is far down the road now in terms of actually happening: cap and trade.

All the big actors have lined up behind cap and trade - because the tax code has historically been proven to be incredibly messy to write and administer. "Neat" carbon tax fantasies must die; there is no neat tax code anywhere.

Thus, a carbon tax is simply not realistic.
Posted by Barry Clark on 08 May 2009


I am surprised and disappointed that there has been so little discussion about a Cap and Rebate plan as mentioned by Mr. Barnes as a third alternative to Cap and Trade or Carbon Tax.

Clearly a straight carbon tax is lacking in that it offers no cap. We need an ever decreasing cap on carbon and we cannot depend solely on a tax to drive that.

On the other hand I am desperately concerned about placing the future of my two year old granddaughter in the hands of a market system that is driven principally by greed. The market” cares little, if at all, for her future and the future of the millions of other children that will suffer from our inability to pass aggressive and meaningful legislation.

As an ordinary citizen trying to make ends meet I see nothing wrong with getting a check very month from the very industries that for years have been instrumental in bring us to what
seems like the edge of environmental disaster. This is a plan that the American people can both
understand and, I think, support. I believe that strong support from citizens would go a long way in helping Congress grow a spine move ahead with legislation.

I have yet to hear a solid argument why Cap and Rebate would not work. It is simple and by
comparison, a breeze to install and run; offers an ever lowering of carbon emissions and returns cash to citizens to offset the inevitable increase in energy costs.

One last thought. Heaven help us all if one day we find ourselves sitting in front of our grandchildren trying to explain to them why, instead of heeding the desperate warning of
science we spent all this precious time debating how to save a buck. I know the arguments are well intentioned but we have left ourselves precious little time to secure the future for the
ones we love. We need to get at it and we need to get it right.
Posted by Peter Kugler on 09 May 2009


The UN IPCC states that 3 percent of all CO2 is natural. Three percent of the 385 PPM is then man made according to the IPCC. Forty-seven percent of all CO2 is created due to electricity production according to the DOE.

385 PPM times .03 times .47 equals 5.43 PPM caused by man made electrical generation. The US uses 25 percent of the world's fossil fuel, I assume that this would be close to 25 percent of the carbon dioxide production from power generation. Twenty-five percent of 5.43 PPM for worldwide CO2 for power is 1.4 PPM caused by US power production.

Currently, 2 percent of our power is generated by wind and solar. The administration by passing this multi-trillion dollar carbon trading tax hopes to double this 2 percent. Two percent of the 1.4 PPM caused by this activity is .02 times 1.4 PPM or .028 PPM, this is .007 percent of the CO2 in the atmosphere. This amount of CO2 is not measurable and the affect of this .00007 part of the atmosphere could not warm your morning cup of coffee in the morning over 100 years.

The "crisis" is to educate Americans of the facts before this tax bill can be passed.
Posted by Dahun on 09 May 2009


Consider the following statement from the initial post: "Supporters of cap-and-trade argue that it has two main strengths. It sets a steadily declining ceiling on carbon emissions, and, by creating a market that rewards companies for slashing CO2 (corporations that reduce emissions below their allotment can sell them on the open market), it uses the free enterprise system to wean the country off fossil fuels and onto renewable energy."

This perpetuates the myth that we have a "free enterprise system," a myth that should have been shattered by events of the last few years as unfettered capital markets were allowed to darned near destroy the world economy. Our "free enterprise system" has created firms "too big too fail," an impossibility in a truly competitive environment. Free enterprise gets support when it generates profits but seeks help from governments whenever it is threatened with losses.

Doesn't it seem less than coincidence that most companies prefer a cap-and-trade approach to controlling carbon emissions while most economists favor a more direct carbon tax? Which system will be easier to "game"? Cap-and-trade also allows politicians to hide from reality a while longer while pretending to be in the forefront of "carbon control" or whatever other phrases start to turn up in political ads. And you thought Kermit the Frog was green!

I tend to agree with David Cohen, who wrote today that:

"Solving problems becomes harder and harder as time goes on. We want to build those wind farms, we really do, but somehow we just can’t get it together. It takes years and years to get around to doing Big Projects—if we ever do. In the 1950s, when we built the interstate highway system, anything seemed possible. In 2009, nothing does. We know how to print money but we no longer know its value or how to spend it.

Therefore I don’t think the Big Earthly Powers (the US, the EU-27, the BRIC countries) which have achieved or desire comfort will ever have the political will to make an 80% carbon dioxide emissions cut by 2050. Of course, the date 2050 is meaningless in 2009, which is the whole point. If such a reduction does occur, it is far more likely to happen because humankind ran short of fossil fuels to burn, not because of voluntary efforts to reduce our carbon footprint."

As an example of our priorities, consider this final one. President Obama recently proposed $5 billion to "study" possible high-speed rail systems. We trucked $180 billion or so over to the loading docks at AIG. We should have done the opposite, sending the message that CHANGE really is on its way. That $180 billion, maybe coupled with what we shoveled off to Citi, B of A, and a host of other pillars of "free enterprise" would have gone a long way toward creating alternative transportation and energy systems in the USA.

It isn't hard to see where our nation's priorities really are.
Posted by Gary Peters on 11 May 2009


It's peculiar that straight-up regulation isn't part of the discussion here, with only Eileen giving it a faint mention. I find that very strange since regulation is very much on the table as the stick Obama is using to try to get Congress to pass cap-and-trade. Want more wind/solar and less coal e.g.? Just make coal plant permits very hard to get and wind/solar permits easy to get. Utilities know perfectly well how to respond to that kind of pressure.

Even if one believes that a properly designed pricing scheme of one sort or another would work better than regulation, the present reality is that we're unlikely to get any such thing out of Congress. The obvious advantage of such a scheme over regulation -- locking in a long-term commitment -- becomes a disadvantage if the scheme is too weak. Since we have an Administration that's serious about addressing the problem, it's better to regulate now and wait until such time as a clearly superior pricing scheme can be passed.

Note that in the transportation sector we're headed toward a regulation-only approach, even though there's no obvious reason why cap-and-trade or a tax couldn't be made to work. Probably it's obvious to most that they wouldn't work as well, but then why doesn't the same hold for the power generation sector? Is it only because lo those many years ago Bill Clinton wanted to motivate Wall Street to support Kyoto? If so that's no longer much of a reason.

Environment 360 should sponsor a further forum to fairly consider the regulation option. I look forward to that.

Posted by Steve Bloom on 11 May 2009


As a carbon based life form, I find this new "War on Carbon" utterly baseless and the answer to a purely political question.

Tax, no tax, cap and trade, none will have any affect on climate change, as climate change is a
natural fluctuation of our living earth. The planet wars slightly, then cools slightly. Ever has it
been so.

I find it ridiculous that people such as Jim Hansen from NASA are followed as some prophet as to decide what the "proper" level of a trace gas in the atmosphere of a planet must be.

I find it even more irreprehensible that others such as Al Gore will make billions of dollars providing absolutely no good nor valuable service to society, other than creating new jobs in China and massively increasing pollution from the export of those jobs.
Posted by Shoshin on 11 May 2009


The discussions leave out one major issue - is the whole concept of carbon (dioxide) reduction cost effective? What benefits are derived? At what cost? Are these benefits therefore justified?

I cannot understand anyone buying into another tax without having a clear understanding of the actual benefits. It seems to me that reducing the use of fossil fuels by say 50% (as some would inisist) would have minimal effect on 'climate change', but an incredibly negative effect on our standard of living.

Climate changes - it has done for millions of years. It is the height of arrogance to think that humans, by adding a few ppm to a trace gas that is VITAL to life, will have any measurable effect.

What will reducing carbon (dioxide) do? The advocates say it will prevent sea-level rise! King Canute knew a thing or two. The planet has adapted to varying sea level changes as has all life (including us humans). Changes of a few inches per century is hardly noticeable and easily adapted to. What else will it 'prevent'?

What are the benefits of increased warming and carbon dioxide? Higher agriculture output; fewer deaths from cold (a much greater death rate than from heat); better overall climate and thus a better life for the vast majority of life - evidence the incredible explosion of life during the warm times (when average temperatures were 22oC, rather than the 15oC of this current INTERGLACIAL PERIOD.

We need real economic analyses, not moralistic, consensus, computer-generated, or 'save-the-planet', feel-good/guilty discussions of a issue that is not only not proven but is impossible for man to change! I would be interested to get feedback on the real cost benefits.
Posted by Chris Jonassen on 11 May 2009


Simple System Approach

Tax all Fossil Fuels to the limit of unbearable pain to the middle class. This will automatically take us back to the CO2 production levels of the 1950s/40s. Then take all that excess money that is generated by these CO2 taxes and fund national health care for the underclass of our country and fund our government even more for greater bureaucracy and power. Then the underclass and the plutocracy will be happy and content and live happily ever after.
Posted by D. Brown on 11 May 2009


In many parts of the world emissions created by wildfires far outstrip that from stationery fossil fuel burning. How then do global warming CO2 protagonists propose to tax those outputs?
Posted by Alan on 12 May 2009


The major offenders must be imprisoned. All volcanoes and forests should be under lock and
key.
Posted by dag on 12 May 2009


I pose the following question: On what basis policy makers feel compelled to act?

A recent study of planetary heat balance (not land based temperatures) by one of the leading atmospheric scientists planet shows that as a whole, the Earth is cooling slightly. This study falsifies the entire GISS model and disproves the hypothesis of anthropogenic warming. AGW is a chimera; it is not real, and has now been proved so.

Do policy makers feel compelled to follow a flawed and disproved model for their own political gain? One would hope not, but again, what is their basis for action?

It certainly is not scientific. Is it moral? Political? Financial?
Posted by Shoshin on 12 May 2009


You all assume the science is settled, as the scaremongers want! Neither cap-n-trade nor taxes are required because carbon is not the problem. Only the hot air generated by the likes of you esteemed academics is the problem. I'll bet good money on global temperature decline over next 50 years, and that you'll all quietly flip over to the dark side when the evidence is irrefutable.
Posted by Pete in New Zealand on 12 May 2009


Personally, I think a straightforward carbon tax would be preferable to a cap-and-trade system. It would be much quicker and easier to implement, provide greater transparency and certainty of the cost to businesses and be less prone to political manipulation.
Posted by Ryan on 29 Aug 2009


I like the market based cap on greenhouse gas. Like Obama said, I think it is the best way “to truly transform our economy, to protect our security and save our planet from the ravages of climate change.”
Posted by James on 18 Sep 2009


The key elements of cap and dividend are: (1) an upstream cap on the first sellers of fossil fuels; (2) 100% of permits auctioned; and (3) all or most auction revenue returned to citizens on a per capita basis. Trading of actual permits could be allowed, but there would be no offsets.

Like a revenue-neutral carbon tax, cap and dividend has the virtues of simplicity, economy-wide coverage, and protecting households against the impact of rising energy prices. And like a traditional cap and trade system, it has the virtue of physically limiting emissions (more so, actually, since there are no offsets).
Posted by sohbet on 20 Oct 2009


Currently, 2 percent of our power is generated by wind and solar. The administration by passing this multi-trillion dollar carbon trading tax hopes to double this 2 percent. Two percent of the 1.4 PPM caused by this activity is .02 times 1.4 PPM or .028 PPM, this is .007 percent of the CO2 in the atmosphere. This amount of CO2 is not measurable and the affect of this .00007 part of the atmosphere could not warm your morning cup of coffee in the morning over 100 years.

The "crisis" is to educate Americans of the facts before this tax bill can be passed.
Posted by Jay on 22 Oct 2009


Obama is a master tactition and will bring the states into the 20th century with his bold and innovative plans which include the reduction of greenhouse gases omissions and rightly so in my view.
Posted by James on 24 Oct 2009


I'm not so sure James is correct with regard to his faith in Obama. Sure, the issue will be better managed than it would have been under McCain, but I am not expecting miracles from Obama either.

After the serious blow dealt by the economic crisis of 2008, it seems clear that people are much more focused on their own prosperity than the general good. The crisis has made people more inward looking with regard to issues like these.

Posted by Norton on 29 Oct 2009


The market system will probably work quite well. In Germany we have a system where CO2 certificates can be traded and this works quite nice so far. Maybe this is a good way, let's see!

Posted by Florian on 30 Oct 2009


@Florian. It's not just Germany that has a carbon trading system. More on it on wikipedia http://en.wikipedia.org/wiki/Emissions_trading
Posted by The Hamster on 05 Nov 2009


I am also not so sure with its James. You are right, since there ekonomo crisis in 2008, people were more interested in themselves. I hope, in the world economy is getting better, so it will not happen again poverty. crisis was already making more people look into related issues like this.

Posted by financial advisor on 08 Nov 2009


In many parts of the world emissions created by wildfires far outstrip that from stationery fossil fuel burning. How then do global warming CO2 protagonists propose to tax those outputs?

Posted by antiques on 15 Nov 2009


Cap & Trade will require a bloated, byzantine, bureaucracy leading to endless lawsuits and delay. It will invite political meddling, outright corruption, and will quickly lose public support. On the other hand, a uniform Carbon Tax will encourage all of us to reduce our CO2 emissions and develop renewables in a transparent and logical way.

Posted by Wally on 16 Nov 2009


There are differences between taxes and cap-and-trade that need to be recognized. First, environmental effectiveness: A tax does not guarantee achievement of an emissions target, but it provides greater certainty regarding costs. On the other hand, political and economic forces strongly point to less severe targets if carbon taxes are used, rather than cap-and-trade — this is not an acceptable tradeoff, and this is why environmental NGOs are opposed to the carbon-tax approach.

Posted by sohbet on 17 Nov 2009


Since all animals, including humans, exhale carbon dixoide with each breath, is the EPA now empowered to regulate our breathing? And since carbon dioxide is required for all plant growth, including all foodstuffs, how can it be classed as a pollutant?

Posted by Pariuri on 24 Nov 2009


A straightforward carbon tax has vast advantages. It can be levied upstream at a few dozen places — at the wellhead, the mine face, and the liquid natural gas depot — rather than at thousands or tens of thousands of businesses. A carbon tax covers the entire economy, including automobiles, household use, and other units impossible to reach in cap-and-trade. A carbon tax puts a clear price on carbon emissions for many years ahead, while a cap-and-trade system gives a highly fluctuating spot price.

Posted by Ana  on 23 Dec 2009


The question must be asked, how long must we talk about what the best carbon emissions scheme is before something is done? Months, years could go by before the politicians finally agree on what the "best" solution is - although let's face it, there will never be widespread agreement on what the "best" solution is.

Surely, given the nature of the problem we are facing, it is better to just get SOMETHING in place to reduce the worldwide carbon emissions and then adjust the scheme in the coming years?

Basically, talk is cheap. How many tonnes of CO2 went into the atmosphere while I write this comment?

Posted by Peter on 05 Jan 2010


Reducing US carbon emissions by 83% by 2050 would require the investment of ~$30 trillion between now and 2050. Any carbon tax, or allowance sales price, or allowance auction price would merely add that cost to the investment requirement, increasing the overall cost of compliance, which would ultimately be passed on to consumers in the prices of goods and services.

Reducing global carbon emissions by 83% by 2050 would require the investment of ~100 trillion between now and 2050. (IEA estimates $45 trillion for a 50% reduction by 2050 globally.)

Stabilizing atmospheric carbon concentrations by 2050 would require the investment of ~$150 trillion between now and 2050.

Even if the U.S. invests the ~$30 trillion, the rate of growth of atmospheric carbon concentrations would not decrease on an absolute basis unless the remaining ~$70 trillion were also invested in the other countries on the globe.

U.S. "unilateralism" is not an effective option. We cannot "save the globe" on our own.

The idea of a continually adjusted carbon tax reminded me of a sign one of my supervisors had on the wall of his office: "Firings will continue until morale improves."

Posted by Paul on 07 Jan 2010


While I prefer a tax I think it's time to get going and at least get something in place for the short term while we sit around arguing for decades.

Posted by Zac on 11 Jan 2010


Sach's last point is very true about cap-and-trade.

Better the devil you know as the saying goes i guess. There's a few comments on here supporting straightforward carbon tax but i think this would be an ill thoughtout quick solution.

Posted by Elliot on 04 Feb 2010


While I prefer a tax I think it's time to get going and at least get something in place for the short term while we sit around arguing for decades.

Posted by Almanya Sohbet on 06 Feb 2010


"carbon dioxide is required for all plant growth"

I agree but we have ten times or hundred times more carbon dioxide then required, so my friend don't worry about the plants, be worried about humans and maybe animals.

Posted by Pariuri on 12 Feb 2010


Personally, I think a straightforward carbon tax would be preferable to a cap-and-trade system. It would be much quicker and easier to implement, provide greater transparency and certainty of the cost to businesses and be less prone to political manipulation.
Posted by metropolitana on 19 Feb 2010


I do think you missed something in how you framed this conversation. By focusing the discussion around Cap & Trade v. Tax, the issue became more complicated than necessary. The real question is: Cap & Auction, Cap & Giveaway or Carbon Tax?

Posted by Alex on 10 Mar 2010


I am surprised and disappointed that there has been so little discussion about a Cap and Rebate plan as mentioned by Mr. Barnes as a third alternative to Cap and Trade or Carbon Tax.

Posted by tomAstaire on 23 Mar 2010


Isn't the expansion of government power in and of itself an added carbon footprint? In this instance, to create a large climate/tax regulatory apparatus would itself contribute to a carbon footprint!

I am not proposing that we ignore or dispute global warming science, but at a very basic level any added activity, be it political, economic or personal, is added stress on the environment. To the extent that economic growth correlates to increasing carbon outputs, the "solution" is to slow First World expansion, including up-and-comers such as China and India.

I do not support the restraint and repression of the people in favor of the environment, but nor do I support unsustainable living standards. Therefore, at best we are at a loss to strike a balance. Cap-and-Trade simply won't achieve that objective: It is an inelegant solution at best.

If we wish to be painfully honest about where this is headed, we can't ignore the possibility that protecting the environment will involve making the cost of living too high, thereby reducing consumption levels and family sizes (negative birthrates). Until the phantom something-for-nothing "free energy" technologies come on-line, communities and individuals worldwide will eventually catch on that change = pain. A Green planet is a downsized one, physically, economically or both.

Policy that creates de facto winners and losers, profiteers and peasants, is a recipe for civil unrest. It is doubtful that even the stated aim of protecting and preserving our planet for future generations will be sustained under such socially stratifying conditions.

Posted by NewsView on 20 Apr 2010


Its frustrating that we must watch the political parties of our nation fight with each other over the best carbon emissions scheme ...and yet nothing is moving forward. I understand that it's not likely that we'll ever see full agreement but couldn't we stop focusing our attention on the minutia and just get something moving ? I mean..isn't something better than nothing at all?

At least if something gets put into place and a structure defined...we could then improve upon it. It seems as if the biggest hurdle is always to just get started.

Posted by Mark on 23 Apr 2010


Their are allready many alternative energy resources like wind energy and solar energy.

The big companies that supply energy into the households will not go into this booming business because those companies will earn less.

I think alternative is great for households that have low-income.

I think in the near future if governments agree alternative energy will be a fact. This is all clean energy and has low-cost.

Posted by makitel on 24 May 2010


I think the easiest and most convinient thing is to set up a carbon tax. But that is already a really hard thing to install considering the fact that there is probably never gonna be real cooperation between the countries. The leaders would rather waste more time and money with talking for decades without any real results. Plus they produce loads of CO2 with their shiny cars and private jets.
Posted by book acne on 27 May 2010


I am surprised and disappointed that there has been so little discussion about a Cap and Rebate plan as mentioned by Mr. Barnes as a third alternative to Cap and Trade or Carbon Tax. Their are allready many alternative energy resources like wind energy and solar energy.

Posted by Info berita terbaru on 03 Jun 2010


I'm not so sure James is correct with regard to his faith in Obama. Sure, the issue will be better managed than it would have been under McCain, but I am not expecting miracles from Obama either.

After the serious blow dealt by the economic crisis of 2008, it seems clear that people are much more focused on their own prosperity than the general good. The crisis has made people more inward looking with regard to issues like these.

Posted by Paulie on 30 Aug 2010


The major offenders must be imprisoned. All volcanoes and forests should be under lock and
key.
www.sarkisozu.in
Posted by Şarkı Sözü on 05 Sep 2010


In present times the people are more focused on their own prosperity than the all mankind good. Taxes will not fix things!
Posted by Mole on 10 Sep 2010


The key elements of cap and dividend are: (1) an upstream cap on the first sellers of fossil fuels; (2) 100% of permits auctioned; and (3) all or most auction revenue returned to citizens on a per capita basis. Trading of actual permits could be allowed, but there would be no offsets.

Like a revenue-neutral carbon tax, cap and dividend has the virtues of simplicity, economy-wide coverage, and protecting households against the impact of rising energy prices. And like a traditional cap and trade system, it has the virtue of physically limiting emissions (more so, actually, since there are no offsets).
Posted by Sohbet on 12 Sep 2010


I personally am for a Carbon Tax. It is already easy at first to impose on the most polluting vehicles. Some people have the means to buy big cars for unnecessary trips to town, so I think they have the means to pay a fee.
Then on a charge on fossil fuels, it will be complicated because it is the developing countries will be most affected, they are the worst polluters but not necessarily those with the most resources to fulfill this tax.
Posted by motoneige on 14 Sep 2010


If there is a carbon tax, then all of the revenues generated from the tax should only be used toward research and development of renewable energy sources.

We need to limit the areas where the government can have ridiculous amounts of wasteful spending on stuff that we don't need.

Posted by Dave on 16 Sep 2010


I personally think adding a carbon tax is a good thing. This is the government's way to control industry polluting the environment.

Posted by Jack on 17 Oct 2010


well i think a carbon tax is very unfair i thing we have equal responsible and when it came to the money the rich country will be the winner.


Posted by lelafik on 14 Nov 2010


It's hard to believe, that this decision process is being used as an excuse by congress to do nothing. The Germans may not have the perfect answer to the problem, but at least they're cutting CO2 emissions and that's been happening for years.

Posted by Eduard Glass on 17 Dec 2010


I think the easiest and most convinient thing is to set up a carbon tax. But that is already a really hard thing to install considering the fact that there is probably never gonna be real cooperation between the countries. The leaders would rather waste more time and money with talking for decades without any real results. Plus they produce loads of CO2 with their shiny cars and private jets.

Posted by Arnold on 22 Jan 2011


I am with Jeffrey D. Sachs, that a carbon tax would be the most beneficial. Emissions are quite dangerous, I agree, but if you tax carbon then it's quite clear that it will reduce emissions. Taxing carbon would be a much simpler way of politically and environmentally dealing with these issues of pollution.

I don't understand either, as Lee Schipper has indicated, why trade goods and trading is taxed. It must be commonplace to drive money to where it can grow and I believe that the carbon tax would benefit tremendously both the environment and political scenarios. With the tax, you can allocate resources to promote environmental recovery.

Sincerely,
The Glaring Facts
http://www.theglaringfacts.com

Posted by The Glaring Facts on 01 Feb 2011


As with all really good lies they have to be at least 90% true! So it is with this article. Would they create jobs? Oh yes but how many would be lost in their place. Spain followed the program and lost 2 1/2 jobs for each created. Additionally all they want is a "level playing field." Sounds fair except when you understand that the costs are so much higher to produce "Green Energy" that in order to make it financially realistic you would need to increase the cost of traditional energy 5 to 7 fold!

$12 billion in taxpayer-funded subsidies each year that he refers to are tax incentives to produce energy not a Government subsidy as they would receive. It a lot easier to invest when you can get the Government to guarentee your principle! Look how well it worked with the Housing Industry and the Wall Street Bank

Albanos

Posted by Albaniax on 05 Feb 2011


I think Sach's argument is weak, until the very last part, which is quite sensible:
Let me be clear, though. Cap-and-trade is a big improvement over the do-nothing status quo, even if it’s less desirable than a carbon tax. If politicians insist on cap-and-trade, we shouldn’t let the best be the enemy of the good.

Posted by asher on 06 Feb 2011


I do think you missed something in how you framed this conversation. By focusing the discussion around Cap & Trade v. Tax, the issue became more complicated than necessary. The real question is: Cap & Auction, Cap & Giveaway or Carbon Tax.

Posted by Allan on 15 Feb 2011


In my opinion, instead of battling on cap-and-trade is better than a carbon tax why don't they pass a law totally banning the carbon emissions and recommend to use solar energy.

Posted by rugs on 22 Mar 2011


In my opinion, instead of battling on cap-and-trade is better than a carbon tax why don't they pass a law totally banning the carbon emissions and recommend to use solar energy.

Posted by michael00 on 29 Apr 2011


instead of going in a lose battle about using one source of fuel why not passing a new law to change all cars and trains gradually use renewable sources of energy. This will be much better.

Posted by egysat on 24 May 2011


Do not ask whether it is a tax or emissions cap. We know it very well that money does everything. What is it for they pay the tax? Nothing at all! The money-you call it tax or emissions cap, or what ever it is-does not make the things better. The earth is still getting darker and nothing greener no more. It is not the money..., it is within us, human.

Posted by Rattan on 28 May 2011


The only way we can succeed with the massive challenge of restructuring our energy system to avoid catastrophic climate change is to make "going low carbon" the best way to make money in the whole economy. Ultimately, this is the purpose of both cap-and-trade and a carbon tax.


Posted by Dave Solar Power on 29 May 2011


Reducing US carbon emission by 83% by 2050 would require the investment of ~$30 trillion
between now and 2050. Any carbon tax, or allowance sales price, or allowance auction price would merely add that cost to the investment requirement, increasing the overall cost of compliance, which would ultimately be passed on to consumers in the prices of goods and
services.

Reducing global carbon emissions by 83% by 2050 would require the investment of ~100 trillion between now and 2050. (IEA estimates $45 trillion for a 50% reduction by 2050 globally.)

Stabilizing atmospheric carbon concentrations by 2050 would require the investment of ~$150 trillion between now and 2050.

Even if the U.S. invests the ~$30 trillion, the rate of growth of atmospheric carbon concentrations would not decrease on an absolute basis unless the remaining ~$70 trillion were also invested in the other countries on the globe.

U.S. "unilateralism" is not an effective option. We cannot "save the globe" on our own.

The idea of a continually adjusted carbon tax reminded me of a sign one of my supervisors
had on the wall of his office: "Firings will continue until morale improves."

Posted by poojasharma on 20 Jun 2011


Incentives to produce energy not a Government subsidy as they would receive. It a lot easier to invest when you can get the Government to guarentee your principle! Look how well it worked with the Housing Industry and the Wall Street Bank

Posted by ertan on 05 Jul 2011



 

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Unity College in Maine was the first in the U.S. to divest all fossil fuel holdings from its endowment. In an interview with Yale Environment 360, Unity president Stephen Mulkey talks about why he sees this groundbreaking move as an ethical decision and an extension of the college’s mission.
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