Eco Maniac: Carbon, Carbon Everywhere
There's a lot of debate lately about the best method of reducing carbon by monetizing emissions. Basically, there are two camps: carbon tax versus cap and trade. Both plans have their merits; both have their flaws. I've been studying up on the issue for several weeks and still don't know which is the better model.
Implementing a carbon tax is probably the simpler way to go. We already have a system in place and an understanding of how taxes work. A carbon tax would be an amount tagged onto products and processes that emit carbon. The system is flexible in that the amount can be easily shifted in order to achieve maximum success. If it's too high and burdensome, it can be lowered; if it's too cheap to provide a good carbon reduction incentive, then it gets bumped up until polluters are inspired to clean up their acts.
Seeing as tax increases of any kind strike fear in the hearts of many and riots in the aisles of Congress, proponents of the carbon tax scheme propose to make it revenue neutral by reducing taxes in other places, such as payroll taxes. That way we're taxing things that we collectively consider harmful and in need of reduction while lightening the load on something we collectively consider beneficial and want to boost. Makes good sense, right?
Some reports insist that most economists like the carbon tax plan. It's straightforward, flexible, transparent and manageable, and we can estimate how much income we'll generate based on historical usage. However, ExxonMobil likes the idea and that has to trigger cause for concern. I mean, do we really want to run gadarene into something that Big Oil supports? That has never served us well in the past.
That might be why when Senator Barbara Boxer recently rolled out her six Principles of Global Warming legislation, she put her considerable heft behind the cap-and-trade idea. Boxer, who is the chair of the Environment and Public Works Committee, said, "We're willing to look at everything... but we believe cap-and-trade is the way to go."
The best thing, as best I can tell, about cap and trade is that we can set and control the reduction goals. We can't, however, control the prices which are largely subject to market volatility. In a nutshell, companies would have to buy permits that would allow them to pollute. Only so many permits would be available, so companies that reduce their emissions and have extra permits would sell them to other companies who need them. It's a free market solution that demands a certain trust of big businesses and I, for one, am wary of those right now.
Although the system worked well for acid rain reduction in the early 1990s, Europe put a cap-and-trade program into effect in 2005 and it failed miserably. Too many permits were issued and the prices plummeted. Phase two of their program kicked into gear last year and is doing better. Because of this the European Union is fairly well stuck on the idea, so if we want to be part of the global picture, c-and-t might be the better dress to wear.
There are formidable forces – from John Boehner to Nancy Pelosi to Steven Chu – lining up on both sides of the debate. Getting a carbon tax passed in this economic climate might be tough, while the cap-and-trade program may provide just enough political cover to ameliorate the fact that it is, in essence, a tax in policy clothing and allow it to squeak through. Some advocates say that auctioning off the c-and-t permits resolves the price control and over-saturation issues; opponents argue that's just putting lipstick on a very expensive and complicated pig.
I don't wear lipstick and I don't eat pigs, so I really can't say either way.