Cap and trade or carbon tax?

Cap and trade (No votes)
Carbon tax
Total votes: 3 (75%)
Both are for globalist fake liberals/capitalist running dogs
Total votes: 1 (25%)
Neither. Why do you hate America? (No votes)
Total votes: 4

Cap and trade

1
sunlore wrote:(Maybe there should be a seperate thread for this one)

I agree.
sunlore wrote:
Andrew. wrote:
Making cap and trade work is another works-only-in-theory model. It's too open for corruption and rigging. Cap n' trade is terribly problematic. It's just another subsidy for historical bad actors.

Carbon pricing in the form of taxes are simpler and less open to being broken. I support this.

This post is not to gloat, Andrew, as I thoroughly enjoyed this conversation (and meant to get back to you on it), but apparently a suspected rise in costs of emission rights (through cap 'n trade) has prevented two (out of a projected five) new coal plants from being realised in the Netherlands.

Meanwhile, PriceWaterHouseCoopers calculated that energy produced by coal plants will not be anymore profitable if and when "emission rights are fully taxed."

(Couldn't find an English article, here is that report (I sure as fuck didn't read it)).

Your points are taken, though.


I don't feel informed enough to have a strong opinion on cap-and-trade vs. a carbon tax or another option. My semi-informed impressions are these:

- Cap and trade has a much better chance of being implemented because a) some undeniably well-connected people stand to make money trading it, and b) unlike the carbon tax, the public will see it as a tax corporations pay and not consumers, despite that there is no such thing.
- The carbon tax has the advantage of simplicity and transparency, and there's less potential of its proceeds going to buy new fuel-cell Bentleys clogging up lower Manhattan.

I think cap and trade is guaranteed to be a disaster if the credits are given away or auctioned off too cheaply in the first place, as I understand did happen in Europe. Is there any way it isn't going to happen here?
"It's like I'm in a rocket ship."

Cap and trade

2
If you believe that government regulation is the best way to curtail carbon use, a carbon tax is the most efficient penalty that government can offer.

Cap and trade wins votes without changing anything (for the better at least). It is crap.

Last I heard, Ralph Nader is the only major candidate offering this solution. This may have changed?
"The best argument against democracy is a five minute conversation with the average voter."
-Winston Churchill

Cap and trade

3
Unarmedman, do you think that self-regulation is a better way? Better than government regulation?

Do tell.

Personally I think that we're past the point of regulation. Regulation would have been ideal in the early seventies, self-regulation the ideal before that. What we need now is schedualed prohibition, business has brought that on itself by failing to self-regulate. Our of necessity, we will see illegalisation and nationalisation of a harsh variety in the future. The longer we put it off, the harsher it will eventually be.

How can we tell that the future isn't being accounted for? Because the foresight of laissez-faire capitalism doesn't stretch past the paultry lifespan of an obese white golfer.

Cap and trade

4
unarmedman wrote:Last I heard, Ralph Nader is the only major candidate offering this solution. This may have changed?


Joe Lieberman is a proponent of cap-and-trade, too. It's a beautiful theory as long as no humans are involved.

The only remotely failsafe way to regulate is to do so from the consumer end. Carbon taxing hedges stagflation, and cap-and-trade begs for as-yet-unseen, obscene degrees of energy lobbying and boiler room dealing. Getting real with vehicle fuel economy and emissions regulations, un-grandfathering ancient power plants, stringent energy usage requirements for appliances and electronics, sustainability regulations, etc. may piss people off in the short term but is far better in the big picture. Energy is cheapened, emissions are lessened, and cap-and-trade lobbyist jockeying is avoided.
iembalm wrote:Can I just point out, Rick, that this rant is in a thread about a cartoon?

Cap and trade

5
in another thread I wrote:Carbon trading in Europe has been pretty worthless so far since the EU set the available credits so high that no one really had to change much. The point is to LIMIT the number of credits available, folks. So far it seems like the push has been to source credits from existing locations like forests rather than "sourcing" them by creating regulated emission ceilings.

When I hear that an event is "carbon neutral" because the organizers have purchased offsets, I laugh. Without knowledge of how those offsets were made available for purchase, who the hell knows if they are meaningful and perpetual?

Trading seems like a necessary evil - an extra layer between no regulation and taxation that allows part of the income to go to private companies rather than directly to governments. Soft tax.


Tax has two things against it that shouldn't impact its chance of happening, but do. One, it's by name a third rail. Two, it doesn't allow politicians to have an instant win. Cap and trade allows for the setting of a carbon cap at so-and-so levels a la Kyoto (bragging rights) while a tax relies on assumptions about willingness to pay out of individual income for the right to pollute. More arcane and politicians won't get into the weeds on this. Regardless, the individual consumers WILL end up carrying the carbon cost on their backs in the end.

I glanced at that Greenpeace report. If I'm reading it correctly the small loss taken by the wind option was made possible by government subsidies (OK) and the deep loss taken by the coal option was almost completely due to the predicted carbon price (good). Thanks for sharing.
DrAwkward wrote:If SKID ROW likes them enough to take them on tour, they must have something going on, right?

Cap and trade

6
big_dave wrote:Unarmedman, do you think that self-regulation is a better way? Better than government regulation?


Ideally, yes, but now probably not.

Just like you said I think its past that point. I think a carbon tax is the best way to generate income for the government and spur a real movement away from carbon-producing technologies.

Again, this is all ideal as no corporate-government entity is going to allow a carbon tax.

FuzzBob wrote:Joe Lieberman is a proponent of cap-and-trade, too. It's a beautiful theory as long as no humans are involved.


Sorry I didn't clarify, I meant that Nader is a proponent of the carbon tax. I don't know where he stands on cap-and-trade.

The regulation of emissions can be costly in bureaucracy as well, but I think there is a time where it might not be needed. The *best* solution is to curtail government debt, restore the value of the dollar, and then money for R&D becomes a reality rather than a bargaining chip.
"The best argument against democracy is a five minute conversation with the average voter."
-Winston Churchill

Cap and trade

7
I don't think the government should have to make money out of fossil fuel regulation.

Taxation for heavy industry, power and its investers should be comprehensive enough that the regulation legislation should deal only in regulation.

Regulation legislation that seeks to generate its own income is usually a bad idea, and not exactly ethical government.

Cap and trade

8
Dr James Hansen provides some food-for-thought about carbon taxation, over cap-and-trade:

Dr James E. Hansen June 2008 wrote:Tax and dividend is the policy complement that must accompany recognition of fossil carbon reservoir sizes for strategic solution of global warming (the physics: reservoir sizes imply the need to phase-out coal emissions promptly and quash unconventional fossil fuels).

Tax and 100% dividend can drive innovation and economic growth with a snowballing effect. Carbon emissions will plummet far faster than in top-down or Manhattan projects. A clean environment that supports all life on the planet can be restored.

“Carbon tax and 100% dividend” is spurred by the recent “carbon cap” discussion of Peter Barnes and others. Principles must be crystal clear and adhered to rigorously. A tax on coal, oil and gas is simple. It can be collected at the first point of sale within the country or at the last (e.g., at the gas pump), but it can be collected easily and reliably. You cannot hide coal in your purse; it travels in railroad cars that are easy to spot. “Cap”, in addition, is a euphemism that may do as much harm as good. The public is not stupid.

The entire carbon tax should be returned to the public, with a monthly deposit to their bank accounts, an equal share to each person (if no bank account provided, an annual check – social security number must be provided). No bureaucracy is needed to figure this out. If the initial carbon tax averages $1200 per person per year, $100 is deposited in each account each month (Detail: perhaps limit to four shares per family, with child shares being half-size, i.e., no marriage penalty but do not encourage population growth).

A carbon tax will raise energy prices, but lower and middle income people, especially, will find ways to reduce carbon emissions so as to come out ahead. Product demand will spur economic activity and innovation. The rate of infrastructure replacement, thus economic activity, can be modulated by how fast the carbon tax rate increases. Effects will permeate society. Food requiring lots of carbon emissions to produce and transport will become more expensive and vice versa – it is likely, e.g., that the UK will stop importing and exporting 15,000 tons of waffles each year. There will be a growing price incentive for life style changes needed for sustainable living.

The present political approach is to set carbon emission reduction goals for 2025 or 2050. The politicians do not expect the goals to be reached, and they define escape hatches that guarantee they will not. They expect to be retired or become lobbyists before the day of reckoning. The goals are mainly for bragging rights: “mine is bigger than yours!”

The worst thing about the present inadequate political approach is that it will generate public backlash. Taxes will increase, with no apparent benefit. The reaction would likely delay effective emission reductions, so as to practically guarantee that climate would pass tipping points with devastating consequences for nature and humanity.

Carbon tax and 100% dividend, on the contrary, will be a breath of fresh air, a boon and boom for the economy. The tax is progressive, the poorest benefitting most, with profligate energy users forced to pay for their excesses. Incidentally, it will yield strong incentive for aliens to become legal; otherwise they receive no dividend while paying the same carbon tax rate as everyone.

Special interests and their lobbyists in alligator shoes will fight carbon tax and 100% dividend tooth and nail. They want to determine who gets your tax money in the usual Washington way, Congress allocating money program-by-program, substituting their judgment for that of the market place. The lobbyists can afford the shoes. Helping Washington figure out how to spend your money is a very lucrative business.

But we can save the planet and alligators by making sure that not one thin dime of the carbon tax is siphoned off by lobbyists for their clients – 100% must be returned to citizens as dividend. Make this your motto: “100% or fight! No alligator shoes!”

Check the position of your congresspersons. If they spout things like “global warming is the greatest hoax in the history of the universe”, check the shoes of the people who visit them or have dinner with them. Changes in Congress are needed if we want our children and grandchildren to win this one.

Because of great benefits to the nation, humanity and nature, this approach soon would be adopted by other nations, providing an obvious path toward international agreements.


I don't know how convincing that is, but cap-and-trade seems problematic, namely by privitizing the commons (i.e. the atmosphere) and creating a new speculative toy for the markets, it could easily have unforeseen effects. Britain is already building more coal-powered stations (8 over the next 30 years), as are Germany and the US. Which will make it much harder to convince India and China to pollute less. The UK government is already looking for escape hatches and pandering to fossil-fuel interests.

Cap and trade

9
Don't forget there are countries (Netherlands, the Scandinavian countries) where cap-and-trade exists on top of an already existing carbon tax structure. Doesn't have to be either or.

Modified constraints for cap-and-trade within the European space are being implimented right now. Going by that Greenpeace report (which is based on predictions calculated from those changes), there is a little room for optimism.

The argument of privatizing the commons is a formidable one. The shady boilerroom dealing thing, I'm less worried about. We'll have the guillotines speak later.

The 100% divident proposal is elegant. What with the figures that Hansen uses, it would cover my entire energy bill, too. Where do I sign up?

Britain is already building more coal-powered stations (8 over the next 30 years), as are Germany and the US.

I wonder where the difference in specific constraints lies between UK and the Netherlands. Carbon tax? Subsidies for green energy?

Didn't the torries propose a carbon tax a while ago?

Hey, I like information. Good talk, guys.

Cap and trade

10
sunlore wrote:Didn't the torries propose a carbon tax a while ago?


Apparently, so.

There's a discussion of caps verus taxes here, from Ken Green of the American Enterprise Institue (wtf?!), weighing the advantages of taxation:

Climate Change: Caps vs. Taxes

Advantages of a Revenue-Neutral, Carbon-Centered Tax Reform

Most economists believe a carbon tax (a tax on the quantity of CO2 emitted when using energy) would be a superior policy alternative to an emissions-trading regime. In fact, the irony is that there is a broad consensus in favor of a carbon tax everywhere except on Capitol Hill, where the "T word" is anathema. Former vice president Al Gore supports the concept, as does James Connaughton, head of the White House Council on Environmental Quality during the George W. Bush administration. Lester Brown of the Earth Policy Institute supports such an initiative, but so does Paul Anderson, the CEO of Duke Energy. Crossing the two disciplines most relevant to the discussion of climate policy--science and economics--both NASA scientist James Hansen and Harvard University economist N. Gregory Mankiw give the thumbs up to a carbon tax swap.[9]

There are many reasons for preferring a revenue-neutral carbon tax regime (in which taxes are placed on the carbon emissions of fuel use, with revenues used to reduce other taxes) to emissions trading. Among them are:

* Effectiveness and Efficiency. A revenue-neutral carbon tax shift is almost certain to reduce GHG emissions efficiently. As economist William Pizer observes, "Specifically, a carbon tax equal to the damage per ton of CO2 will lead to exactly the right balance between the cost of reducing emissions and the resulting benefits of less global warming."[10] Despite the popular assumption that a cap-and-trade regime is more certain because it is a quantity control rather than a price control, such a scheme only works in very limited circumstances that do not apply to GHG control. The great potential for fraud attendant on such a system creates significant doubt about its effectiveness, as experience has shown in both theory and practice in the gyrations of the European ETS.

The likelihood of effectiveness also cannot be said for regulations such as increased vehicle fuel economy standards. In fact, such regulations can have perverse effects that actually lead to increased emissions. By making vehicles more efficient, one reduces the cost of a unit of fuel, which would actually stimulate more driving, and, combined with increasing traffic congestion, could lead to an increase in GHG emissions rather than a decrease.

As Harvard researchers Louis Kaplow and Steven Shavell point out, "The traditional view of economists has been that corrective taxes are superior to direct regulation of harmful externalities when the state's information about control costs is incomplete," which, in the case of carbon emissions reductions, it most definitely is.[11] And when it comes to quantity controls (as a cap-and-trade system would impose), Pizer found that

My own analysis of the two approaches [carbon taxes vs. emission trading] indicates that price-based greenhouse gas (GHG) controls are much more desirable than quantity targets, taking into account both the potential long-term damages of climate change, and the costs of GHG control. This can be argued on the basis of both theory and numerical simulations.

Pizer found, in fact, that a carbon-pricing mechanism would produce expected net gains five times higher than even the best-designed quantity control (i.e., cap-and-trade) regime.[12]

* Incentive Creation. Putting a price on the carbon emissions attendant on fuel use would create numerous incentives to reduce the use of carbon-intensive energy. The increased costs of energy would flow through the economy, ultimately giving consumers incentives to reduce their use of electricity, transportation fuels, home heating oil, and so forth. Consumers, motivated by the tax, would have incentives to buy more efficient appliances, to buy and drive more efficient cars, and to better insulate their homes or construct them with more attention to energy conservation. A carbon tax would also create incentives for consumers to demand lower-carbon power sources from their local utilities. A carbon tax, as its cost flowed down the chains of production into consumer products, would lead manufacturers to become more efficient and consumers to economize in consumption. At all levels in the economy, a carbon tax would create a profit niche for environmental entrepreneurs to find ways to deliver lower-carbon energy at competitive prices. Finally, a carbon tax would also serve to level (somewhat) the playing field among solar power, wind power, nuclear power, and carbon-based fuels by internalizing the cost of carbon emission into the price of the various forms of energy.

* Less Corruption. Unlike carbon cap-and-trade initiatives, a carbon tax would create little incentive or opportunity for rent-seeking or cheating. As William Nordhaus explains:

A price approach gives less room for corruption because it does not create artificial scarcities, monopolies, or rents. There are no permits transferred to countries or leaders of countries, so they cannot be sold abroad for wine or guns. . . . In fact, a carbon tax would add absolutely nothing to the instruments that countries have today.[13]

Without the profit potential of amassing tradable carbon permits, industry groups would have less incentive to try to get credits for their favored but non-competitive energy sources. That is not to say that tax-based approaches are immune from corruption, for they certainly are not. If set too far down the chain of production or set unevenly among energy sources, carbon taxes could well lead to rent-seeking, political favoritism, economic distortions, and so on. Foreign governments might have an incentive to undermine a trading scheme by offering incentives to allow their manufacturers to avoid the cost of carbon trading. A tax on fuels proportionate to their carbon content, levied at the point of first sale, should be less susceptible to corruption, and by delivering revenue to the government rather than to private entities, should create incentives more aligned with the government's objective.

* Elimination of Superfluous Regulations. Because a carbon tax would cause carbon emissions to be reduced efficiently across the entire market, other measures that are less efficient--and sometimes even perverse in their impacts--could be eliminated. With the proper federal carbon tax in place, there would be no need for corporate average fuel economy standards, for example. California's emissions-trading scheme, likewise, would be superfluous, and its retention only harmful to the Golden State. As regulations impose significant costs and distort markets, the potential to displace a fairly broad swath of environmental regulations with a carbon tax offers benefits beyond GHG reductions.

* Price-Stabilization. As the experiences of the European ETS and California's RECLAIM show us, pollution-trading schemes can be easily gamed, resulting in significant price volatility for permits. Imagine one's energy bill jumping around as permits become more or less available due to small changes in economic conditions. A carbon tax would be predictable, and by raising the overall price of energy to include the tax, the portion of energy cost per unit that stems from fluctuation in market rates for fossil fuels shrinks as a percentage of the whole. That shrinkage makes the price of a given form of energy less susceptible to volatility every time there is a movement in the underlying production costs.

* Adjustability and Certainty. A carbon tax, if found to be too stringent, could be relaxed relatively easily over a timeframe, allowing for markets to react with certainty. If found too low to produce results, a carbon tax could easily be increased. In either event, such changes could be phased in over time, creating predictability and allowing an ongoing reassessment of effectiveness via observations about changes in the consumption of various forms of energy. A cap-and-trade system, by contrast, is more difficult to adjust because permits, whether one is the seller or the buyer, reflect significant monetary value. Permit traders would demand--and rightly so--compensation if what they purchased in good faith has been devalued by a governmental deflation of the new "carbon currency." In addition, sudden changes in economic conditions could lead to significant price volatility in a cap-and-trade program that would be less likely under a carbon-tax regime.

* Preexisting Collection Mechanisms. Whether at local, state, or federal levels, carbon taxes could be levied and collected through existing institutions with extensive experience in enforcing compliance, and through ready-made statutes to back up their actions. The same cannot be said for emissions-trading schemes that require the creation of new trading markets, complete with new regulations and institutions to define and enforce the value of credits.

* Keeping Revenue In-Country. Unlike an international cap-and-trade regime, carbon taxes--whether done domestically or as an internationally agreed-upon value--have the advantage of keeping tax payments within individual countries. This could strongly reduce the opposition to international action that has, until this point, had a strong implication of wealth redistribution overlaid on the policy discussion.

This dynamic leads to a second reason why a carbon tax is a better fit for U.S. climate policy: it offers an international analogue to our federalist approach to public policy innovation within the United States. As we have seen, there is reason to doubt the long-run effectiveness and sustainability of the EU's emissions-trading program. If the United States adopts a carbon tax approach, we will be able to compare the effectiveness of tax versus emissions trading in short order.

* Mitigation of General Economic Damages. As energy is one of the three most important variable inputs to economic production (along with labor and capital), raising the cost of energy would undoubtedly result in significant economic harm. Using the revenues generated from a carbon tax to reduce other taxes on productivity (taxes on labor or capital) could mitigate the economic damage that would be produced by raising energy prices. The most likely candidates for a carbon tax tradeoff would be the corporate income tax (the U.S. rate is currently among the highest in the industrialized world) and payroll taxes, the latter of which would lower the cost of employment and help offset the possibly regressive effects of higher energy prices on lower-income households. But across-the-board income tax rate cuts and further cuts in the capital gains tax could also be considered.

Few other approaches offer this potential. Regulatory approaches such as increasing vehicle efficiency standards do not because they mandate more expensive technologies and allow the costs to be passed on to consumers without offsets (unless they are subsidized), in which case it is the general taxpayer whose wallet shrinks. Emissions-trading would allow for this if one auctioned all initial permits and used the revenue to offset other taxes. The vast majority of trading systems, however, begin with the governing entity distributing free emission credits to companies based on historical emission patterns rather than having an open auction for permits that would produce such revenue streams. Without an auction, the revenues in a trading scheme accrue only to private companies that trade in carbon permits, while the companies buying permits would pass the cost on to consumers. International emissions-trading approaches such as Kyoto's clean development mechanism are worse still: the beneficiaries of the scheme are likely to be foreign governments or private entities that can reduce (or pretend to reduce) carbon emissions more efficiently, leaving Americans with higher energy prices and no revenue stream to offset the negative impacts on productivity.


He even makes a case for taxation streamlining governmental function. I'd be interested as to objections to this.

EDIT: I can't find any evidence for this, but I'm guessing the reason conservatives may be in favour of a tax on carbon, is that they hope of pass the costs on the poor.

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