The Father of Cap-and-Trade Calls For... A Tax on Emissions


Arguments Against Cap-and-Trade
In the 1960s, Thomas Crocker, then a graduate student at the University of Wisconsin, came up with an original solution (along with John Dales) to environmental problems: cap-and-trade. The concept is now familiar to us treehuggers, but not everybody thinks it is the best way to deal with global warming, starting with Mr Crocker himself (now 73 years old and retired).
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The Wall Street Journal quotes him as saying: "I'm skeptical that cap-and-trade is the most effective way to go about regulating carbon," and adding that he prefers "an outright tax on emissions because it would be easier to enforce and provide needed flexibility to deal with the problem."

Mr. Crocker sees two modern-day problems in using a cap-and-trade system to address the global greenhouse-gas issue. The first is that carbon emissions are a global problem with myriad sources. Cap-and-trade, he says, is better suited for discrete, local pollution problems. "It is not clear to me how you would enforce a permit system internationally," he says. "There are no institutions right now that have that power." [...]

The other problem, Mr. Crocker says, is that quantifying the economic damage of climate change -- from floods to failing crops -- is fraught with uncertainty. One estimate puts it at anywhere between 5% and 20% of global gross domestic product. Without knowing how costly climate change is, nobody knows how tight a grip to put on emissions.

These are interesting points, though I'm not quite convinced (like Felix Salmon).

One argument against cap-and-trade that I find more worrisome is that it's vulnerable to political meddling because it is so complex. Scientists might say: "The best science we have tells us that what we need to do is this" but the once this has gone through the political machine and thousands of pages of unreadable legal jargon come out, you end up with something like the current U.S. climate bill (85% of carbon permits will be given away for free instead of being auctioned, and many other loopholes might lurk in the shadows).

On that front, a more direct tax on emissions might not be as politically palatable, but it would have the benefit of being a lot more transparent (the tax is this much per pound of CO2 and that's it).

Of course we have to be pragmatic. A carbon tax isn't helping anyone if it's impossible to get into law. But I think that it would be possible - if very hard - to do if it was a revenue-neutral carbon tax; reduce income taxes by the same amount as you increase a carbon tax, and for most people the amount they pay in taxes wouldn't go up (people with high carbon lifestyle might pay more while those with low carbon lifestyles might pay less, but that's the point) and the incentives would be better aligned. We would be taxing "bads" (polluting emissions) instead of "goods" (work).

But we have to work with what we have. If that's cap-and-trade, we should try to make it work as well as possible, and I'm not convince to give up support for cap-and-trade by Mr. Crocker's arguments. I'm more worried that politicians will give nice speech and promise a lot, but not actually do much...

Via Wall Street Journal
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