With the US being world’s largest producer of CO2, it is past time that the US gets serious about reducing CO2 emissions. Instead of seriously addressing the issue however, the US passes feel-good measures like ethanol mandates, tinkers with CAFÉ standards, builds a few windmills and appropriates money for research grants. The inconvenient truth is that to curtail CO2 emissions we must account for the externality of global warming produced by those carbon emissions. The two ways of doing this are a system of cap and trade or a carbon tax. This excellent article from Weathervane, the website sponsored by Resources for the Future, examines the pros and cons of a system of cap and trade versus a carbon tax and tells why a carbon tax is preferable and how it should be designed. Rod
Should We Abandon Cap-and-Trade in Favor of a CO2 Tax?
A Weathervane Commentary
by Ian W.H. ParryMarch 23, 2007
With widespread agreement that global warming is occurring, the birth of carbon permit trading in Europe, and various state-level mitigation initiatives in the United States, it is clear that federal government action to control U.S. carbon dioxide (CO2) emissions is long overdue. Where people disagree is how stringent these policies should be and what instruments should be used. Following the success of the sulfur trading program imposed on the power sector, the momentum in Congress is clearly for some form of cap-and-trade permit system. But before Congress passes new legislation, there is a serious alternative to consider: a CO2 tax. To continue reading: