Cap-and-Trade vs. Carbon Tax: A Bird in Hand Is Worth Two on Alpha Centauri

grist.org

I find it really hard to believe, but the perennial "carbon tax vs. cap-and-trade" debate is still going on. It goes on and on and on and it never changes. It's like everyone's following a script now.

I've been over this territory so many times that I hardly know what to say any more. So here's what some other people are saying:

Joe Romm started this off by asking James Hansen to drop his quixotic and politically toxic campaign against the Waxman-Markey climate/energy bill. Kevin Drum chimed in, supporting Romm.

Michael O'Hare responded with a heated defense of carbon taxes (or as he calls them, carbon charges), premised mainly on a basic misunderstanding of Romm's post. (Joe wasn't defending cap-and-trade as such against the carbon tax alternative -- he was defending Waxman-Markey, including all its complementary policies, against the tax alternative.)

Ryan Avent says taxes and caps are not that different in effect and only one has a chance of passing, so carbon taxers should STFU. Andrew Sullivan responds that he thinks the tax will work better, and so no, he won't STFU. Kevin and Ryan both respond to Sullivan, pointing out that he seems to be suffering from some serious misunderstandings about cap-and-trade systems. (In this he has, to put it mildly, plenty of company).

Meanwhile, Yale 360 has rounded up a group of "experts" to weigh in on the issue, though several of the purported experts seem to understand very little about the policies and/or the politics at hand. The submissions from Jeffrey Sachs and Roger Pielke Jr., in particular, are so poorly argued as to defy explanation. Michael Tobis says that Jeffrey Sachs' argument for a tax "makes sense" to him, but Kevin points out that Sachs' argument is somewhat hampered by the fact that virtually every single sentence is head-slappingly false.

Is that it? I think that's it. For now, anyway. I'm sure the entire roundelay will repeat itself soon enough.

Rather than tread all this ground yet again, here are what I take to be the three key points:

• The policies are, or can be made, roughly equivalent. With a tax you get certainty about prices but uncertainty about emission reductions; with a cap you get the inverse. You can tweak a tax to shift the balance; you can do the same to cap-and-trade. Both can be weakened with loopholes and favors for special interests. Political reality being what it is, either is likely to impose a fairly low price on carbon for the first decade or so. Which means ...

• In the short-term, complementary policies will spur the most action. The never-ending, chin-stroking carbon pricing debate perpetually overlooks this basic fact. (See: “Cap and Trade is Not Enough: Improving US Climate Policy” [PDF] from Carnegie Mellon.) What's going to knock us off the status quo path in the next decade is, above all, new targets and standards for energy efficiency. Also: a renewable energy standard, a low-carbon fuel standard, smart-grid standards and funding, government procurement policies, direct government investment, etc. etc. These are the policies that could get things rolling immediately. And guess what?

• The Waxman-Markey bill contains those complementary policies. Also, it exists. Both these characteristics set it apart from the Alternative Universe Carbon Tax Pony Bill. Carbon taxers seem blinded by a misguided obsession with the specific mechanics of carbon pricing. By bashing Waxman-Markey, they are aligning themselves with people who want to block the best opportunity for climate/energy action in a generation. They're aligning themselves with people who want to block it not in favor of a pony alternative, but in favor of doing nothing, to protect corporate donors. In many cases, they are adopting the exact same rhetoric as conservative obstructionists.

If taxers want to engage productively, they should advocate for tax-like features in the cap-and-trade provision of the Waxman-Markey bill -- price floors and/or ceilings, fully auctioned permits, expanded banking and borrowing, etc. Bashing the whole bill in order to argue endlessly and fruitlessly in favor of a hopeless alternative, the advantages of which exist entirely in the whiteboard fantasies of economists, is politically daft.

The focus should be twofold: a) get complementary policies up andrunning quickly, and b) get some kind of carbon pricing scheme inplace, which in future years -- as the depredations of climate changebecome clearer to the public -- can be tweaked and improved. Passingthe Waxman-Markey bill would achieve both.

Follow David Roberts on Twitter: www.twitter.com/david_h_roberts

Comments

[AntonioSosa]

We don't need ANY more taxes! Taxes are killing our companies and destroying our future! Carbon taxes or cap-and-trade will only hurt us. Famed climatologist Dr. S. Fred Singer says that Cap and Trade, "would be the equivalent of an atomic bomb directed at the U.S. economy, all without any scientific justification."

We pray that honest officials -- Democrats and Republicans -- are able to save us from Obama's destructive schemes, such as cap and trade. Cap and trade would further enrich Obama’s billionaire friends while helping him achieve his goal of transforming the U.S. into another socialist/communist GULAG like Cuba.

More and more scientists and thinking people all over the world are realizing that man-made global warming is a hoax. More than 700 international scientists dissent over man-made global warming claims. They are now more than 13 times the number of UN scientists (52) who authored the media-hyped IPCC 2007 Summary for Policymakers.

Additionally, more than 30,000 American scientists have signed onto a petition that states, "There is no convincing scientific evidence that human release of carbon dioxide, methane, or other greenhouse gases is causing or will, in the foreseeable future, cause catastrophic heating of the Earth's atmosphere and disruption of the Earth's climate."

[Jashand]

Cap-and-Trade = Dead Policy Walking

Robert Shapiro, US Climate Task Force economist (Cliinton undersecretary of Commerce):

"[T]he current financial crisis has made [cap/trade's] vulnerabilities painfully clear. [N]ew, asset-based financial instruments... would throw off a host of new derivatives to be profitably traded by the “professionals.” [A]fter Wall Street’s meltdown... another round of... financial merry-go-r­ound...see­ms either very naïve or very cynical...

"Many economists and some politicians support the major alternative, carbon-based taxes with rebates.... [N]o new financial instruments to trade and abuse... no additional price volatility, because the price of carbon would be set... simple to administer and enforce. And it can be designed to recycle its revenues in payroll tax reductions or rebates.

"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 up with rebates to take away much of its political sting.

If cap-and-trade has become a dead policy walking, those who care deeply about climate change will find that a carbon tax system has become the last, reasonable policy standing."

See http://www.carbontax.org.