Thursday, February 14, 2008

Cap 'n Trade or Tax?

Here is a post from the Director of the CBO - reducing carbon emissions.


10 comments:

Adam M. Rountree said...

One thing that worries me about the tax method for controlling pollution, is the willingness to pay on the consumers part for the products that produce pollution. If a tax is implimented but demand shows inelastic behavoir companys would just be willing to pay the tax and pass it on to the consumer. But a cap on pullution and a trade parctice would really efficently set the price at the corporate level.

Ian Cronogue said...

I think this article does a good job of showing there is not one clear answer to this complicated problem. To me it really doesn't seem that there is a terrible amount of difference in either of the policies. As Adam says a company that is taxed could possibly pass that tax onto the consumer. However, would a cost not be past onto a consumer if there was a cap and trade? It seems to me either way more cost is incurred by the company so there is always the potential to pass it along to the consumer. Regardless, I believe the sooner any system gets into place the better.

Adam M. Rountree said...

If consumers are willing to pay the passed on costs what is there to stop pollution with a taxed system. As we went over in class a tax is usually set a best guess or estimate of the correct level of pollution. In cap in trade after a set amount of pollution, the only option a company has is to lower its MAC or buy more if they want to produce more. Which still creates an efficnet level of pollution.

Drew Moxon said...

I agree with Ian that there would still be a cost passed to the consumer with a cap and trade system. In addition, with the cap and trade system, you have to decide whether to make it local, national, global...in order to give permits for areas that are effected by the pollution. Not that I don't like the idea of the cap and trade system; it would just be hard to implement fairly.

john ferraro said...

I feel that a flexible cap and trade system is the best method to curb C02 emisssions. It is important for the cap to bew flexible because it is hard to predict some technological externaility that could impact the price and ability to cut back on emissions. I hope that one day the UN would be able to implement such a policy globally. I do not feel that it would be unrealistic to see this in my lifetime as the future consequence of climate change become more apparent.

Logan Clark said...

I guess one of the main issues with getting something like a cap and trade system set into policy is the costs that could potentially be passed down to the consumer. But, would these costs be more or less than with a tax, i would think the cap and trade could be a little more favorable because it may not hurt lower income people as much as the tax.

MGraham said...

Weather it is a tax, cap-on-trade program, flexible or inflexible. It's as if we have a choice. CO2 emissions are increasing and we still think that there are choices. Whatever position is taken the consumer will always have to pay the consequences. Just look at the oil prices and how that affects the food basket. This is the trade off we have to make as a society to be able to have a cleaner environment.

chris mobley said...

This is an interesting article that poses the idea that this complicated problem may not have any one particular answer in sight yet. If there were a pollution tax cap set, then the pollution permits were put in place and were in fact able to be traded, it would make a great deal of the amount of overall pollution. of course this would have to be imposed at the highest level, meaning the most pollution generating organizations such as corporations.

jonathan ziemba said...

i have always agreed with the cap on pollution or a permit system. its true that companies will pass the charge of tax onto the consumers, who will most likely pay it if the product is necessary. This makes the tax system look bad because the pollution still occurs

lauren fields said...

i dont understand why consumer prices would still rise if carbon permits were given away and not sold. is this because there would still be a limited number of them available out in the market and firms would buy them from each other, and then pass that cost on to the consumer?