Taking a closer look at the full costs of energy acquisition and dissipation
If the incentive is to reduce carbon dioxide emissions, I think cap and trade works better to achieve this goal. Cap and trade has more benefits than taxes. Firstly, it is more beneficial to the environment in that there is a fixed cap on emissions. With a tax, people can emit as much carbon dioxide as long as they can afford it. The thought is that the higher the tax is on carbon, the less people will use. Carbon is such an everyday use, that people would be willing to make sacrifices in order to continue to use carbon. It’s like when the price of gasoline went up. Did people stop driving their cars or driving less? No they sucked it up and paid the price. Another benefit to cap and trade is that prices can change according to economic conditions, whereas a tax is a flat rate. There is one major problem with cap and trade and that is developing countries would struggle more to meet standards. Countries such as the United States and the European countries would have more power in setting standards, which would negatively affect developing countries. If there was a carbon tax, then all countries both developing and not would pay the same fee. Although this seems fairer, developing countries might not have the funds to support their carbon emissions. At the end of the article, the author mentions that the tax would be better than cap and trade only in this perfect hypothetical situation that he set up. I think it was crucial he mentions that and that cap and trade have some benefits.
Sounds like he read the same article we did. The quote at the end is interesting, that he should “prescribe what should be done in light of what can be done, politics aside, and not to predict what is ‘politically feasible’ and then to recommend it.” It makes me think congress doing what should not be done, no politics aside, is commonplace, which is rather disturbing at first thought. In any case, he defines and defends a carbon tax in mostly economic terms, the "lowest common denominator" as it were: money. You like money right? This way will give you the most money, with seemingly comprable results. Sounds good to me.
I think that Ted Gayer really analyzed his audience well when he presented his thoughts on the cap and trade with carbon tax. These guy in the senate want to hear about the fiscally smart way to deal with climate change and react accordingly. Gayer says that "given the uncertainty of the future costs of climate policy, a carbon tax is more economically efficient than cap-and-trade" and I am sure he won some friends with this idea. I think his idea of attacking the current Clean Air Act and the House Energy Bill really put things into perspective for the people hearing with essay and really highlighted the benefits of his purposed energy plan.
My first reaction in the early to middle of the paper was that the author was extremely too pessimistic regarding the capabilities of a cap and trade system. With either a safety valve or a energy collar with a price floor and price ceiling the allocatively efficient level of emissions could be produced. In addition, with an auction of the quota and shares, the same effect could be generated with further benefits of creating a market for quotas. Even his quote of Al Gore annoyed me after learning in Environmental Studies that Gore is just a popular face representing the problem but knows not the science behind the solutions. Yet, the authors argument pertaining to measuring offset reductions is a valid and good point needing to be addressed. In my microeconomics class my professor too favors a carbon tax because it is more clear cut and would not allow carbon mitigation "cheating." The author's conclusion reveals that he is comparing his ideal perfect carbon tax to the cap and trade actually being worked on in the House, however, in an ideal world the cap and trade may have more benefits than a carbon tax and the tools to make it work are in no way implausible with the growing crisis of carbon mitigation. In conclusion, commenting on the lines of what Milton Friedman said, I think we should not always settle for what seems more politically likely but achieve what is globally most beneficial and make these ideas politically feasible through conclusive scientific evidence.
I was most convinced by the author's argument concerning the uncertainty surrounding price volatility in the future. The authors argues that if we can either set price or quantity, we might as well set price and allow quantity to fluctuate. On first glance, this idea seems contrary to the motivations of climate policy. Why would we want emissions to fluctuate? from an economic perspective, price fluctuations are TERRIBLE for the economy. From an environmental perspective, the idea that emissions will fluctuate is actually positive as well. Some years emissions will be a but higher but during other years, emissions will be lower. Most importantly, though, by keeping prices constant, the argument that "climate policy hurts the environment," can be avoided.
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