Spring Break
Cutting carbon emissions: direct tax or cap-and-trade?
Sanjai Tripathi
Issue date: 5/28/09 Section: Forum
The Waxman-Markey bill - to combat climate change by creating a cap-and-trade system for U.S. emissions of carbon dioxide - is now weaving its way through Congress.
Even with a Democrat president and Democrat-controlled Congress, this will be a tough piece of legislation to assemble and pass. The issue has been intractable for so long because it is both politically hot and difficult for voters to understand.
People get crazy when gas prices move a few cents, the "politically hot" part hasn't changed, but lately we as a voting public have improved our understanding of the topic.
We now seem to comprehend that climate change is occurring, that it probably won't be a good thing and that we have to take some action to stop it.
According to an April ABC News/Washington Post Poll, 75 percent of Americans now agree the government "should regulate" greenhouse gas emissions to reduce global warming, and in a Wall Street Journal/NBC News poll, 53 percent would "approve" a proposal to force industry to reduce emissions even if it meant higher utility bills.
The problem is in the details: How do we construct a fair system to make that change?
Economists widely agree on the answer: a cap-and-trade system for greenhouse gases.
The problem, as economists see it, is that emitting greenhouse gases and causing climate change is free right now. That means people and companies don't have to factor it in to their own purchasing decisions.
Applying a cost to those emissions would force people to re-evaluate their choices. Decisions that create high emissions with marginally little value would be eliminated, while the uses of fossil fuels that we most value would be maintained.
The cap-and-trade system creates tradable allowances for carbon emissions so that the artificial shortage creates a mechanism to apply a price of polluting the atmosphere. The market sets the price at a number we deem allowable, and emissions are cut just enough to reach that point.
Even with a Democrat president and Democrat-controlled Congress, this will be a tough piece of legislation to assemble and pass. The issue has been intractable for so long because it is both politically hot and difficult for voters to understand.
People get crazy when gas prices move a few cents, the "politically hot" part hasn't changed, but lately we as a voting public have improved our understanding of the topic.
We now seem to comprehend that climate change is occurring, that it probably won't be a good thing and that we have to take some action to stop it.
According to an April ABC News/Washington Post Poll, 75 percent of Americans now agree the government "should regulate" greenhouse gas emissions to reduce global warming, and in a Wall Street Journal/NBC News poll, 53 percent would "approve" a proposal to force industry to reduce emissions even if it meant higher utility bills.
The problem is in the details: How do we construct a fair system to make that change?
Economists widely agree on the answer: a cap-and-trade system for greenhouse gases.
The problem, as economists see it, is that emitting greenhouse gases and causing climate change is free right now. That means people and companies don't have to factor it in to their own purchasing decisions.
Applying a cost to those emissions would force people to re-evaluate their choices. Decisions that create high emissions with marginally little value would be eliminated, while the uses of fossil fuels that we most value would be maintained.
The cap-and-trade system creates tradable allowances for carbon emissions so that the artificial shortage creates a mechanism to apply a price of polluting the atmosphere. The market sets the price at a number we deem allowable, and emissions are cut just enough to reach that point.
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