Earth Equity News

Carbon Tax vs. Cap-and-Trade. By Gar Lipow, Grist, January 29, 2009. "Standards-based regulations and public investment are superior to either carbon taxes or cap-and-trade. But we need some form of carbon pricing to reinforce public action, and a carbon tax is superior to carbon trading. The main policy advantage cap-and-traders offer over a carbon tax is certainty. They claim that it is better to fix the ceiling on emissions and let the price vary than to fix the price and hope it produces the reduction you want. However, most cap-and-trade advocates favor an escape clause, a price ceiling which would trigger the issue of more permits, either because they see it as the price you have to pay to get a bill through, or because they honestly favor the policy. In either case, once you have an escape clause, you no longer have the certainty advocates tout so highly... While a perfect cap-and-tax system is better than either cap-and-trade or carbon tax alone, a decent carbon tax is simpler and more workable than a decent cap-and-trade. A mediocre carbon tax is definitely preferable to a mediocre cap-and-trade. A lot of people think we won't get any kind of carbon price this year. Maybe what we should focus on in 2009 is really pushing for green infrastructure, paid for the moment by 10-year bonds with a 3 percent interest rate. As I said at the beginning of this post, public investment and regulation are more important anyway."