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Cap and Trade, Carbon Tax, and the Aspirations of Government

| Tuesday October 23rd, 2007 | 2 Comments

Cap and trade, carbon tax, or aspirations?On hearing that the International Emissions Trading Association (IETA) just named Jack Cogen, CEO of Natsource, as the their new chairman, I decided to do some research on the organization and the concept of emissions trading in general. What follows is a quick synopsis.

The IETA fully supports the objectives of the United Nations Framework Convention on Climate Change. Based on this framework the IETA’s vision aims toward an ultimate objective of carbon emissions reduction and climate stabilization through a global “gas market” established with the use of market-based mechanisms such as “cap and trade”. 

Working with government in establishing effective policy and guidelines is an essential component of any global carbon market and the IETA supports the principal objectives of the Lieberman-Warner proposal for climate change legislation set forth on August 2nd.  An open letter outlining the IETA’s position and concerns on the proposal is available in pdf format here.

While it remains the position of the Bush administration to oppose any cap and trade plan, instead focusing on “aspirational goals” over mandatory mechanisms to reduce greenhouse gases, a well structured cap and trade program, as proposed by Lieberman-Warner and generally supported by the IETA, offers a realistic market-based solution to greenhouse gas emission reduction.

But what are the choices other than the simply rhetorical and a “global gas market” through cap and trade?

A Solution Must Be Real – Not Aspirational

While realistic solutions will likely require more than merely “aspiring” toward a goal of reduced emissions, some economists and policy wonks fear any effective cap and trade scheme will prove unwieldy in its implementation and enforcement, favoring instead a simpler carbon tax approach.

Still others don’t see much difference between cap and trade and a carbon tax.

So what’s the answer? People much smarter than I are grappling even now with the best approach to implementing a market structure for reducing greenhouse gas emission – the rhetorical aspirations of George Bush notwithstanding. 

My purpose here is to bring together several resources on the subject and to highlight the work being done in government (at least some in government) and industry to do the hard work of ironing out effective and reasonable solutions to reducing greenhouse gas emissions and thus mitigating global warming (yes, I said “mitigating”, not “solving”).

Be it a carbon tax, oil tax, cap and trade, or some hybrid form of market mechanics the evolve from the current debate, it is clear any viable engagement of global warming will depend on sound government policy, well structured and implemented market mechanisms, and individual consumers willing to consume less – three pillars working in concert toward a common goal.

Now that’s something to which we can aspire.

Sources for Further Reading:
Gristmill
Environmental Defense
Carbon Tax Center
Knowledge Problem.com
Environmental Economics

Tom Schueneman writers on environmental issues at GlobalWarmingisReal.com and Hugg.ca. He is also the publisher of The History Blog Project.


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  • http://www.ilsr.org John Farrell

    An alternative to cap-and-trade, which often includes giving free credits to emitters, is a cap-and-auction. David Morris and Peter Barnes describe the philosophy here:
    http://www.ilsr.org/columns/2007/071007.html
    The advantage of an auction is that it generates revenue that can be given back as a per capita dividend, helping low income folks afford the increased cost of energy.
    Disclosure: I work at ILSR.

  • http://www.globalwarmingisreal.com/blog Tom

    John, thanks for the info re: “cap and auction” and for the reference to your site.
    I may do some research on the activities of ILSR and write about it either here are one of the other enviro blogs I write for.
    -Tom