Carbon trading vs tax - the debate continues
I still reckon my carbon tax scheme is the simplest I’ve heard: a straight tax, with exports zero rated and imports fully rated, which avoids any issues of losing out to non-participating countries. So far, no takers, but let’s see if anyone can improve on it.
I applied the French derogatory term usine à gaz or ‘gas factory‘ to cap & trade carbon emission schemes. The FT’s Willem Buiter describes the assertion that Cap & Trade is more efficient than a straight carbon tax as baloney, while NZ’s Queen Bee begs the nation’s leaders “Let’s not shoot ourselves in the foot” with their proposed emissions trading regime. Queen Bee also pointed me to an article on the Wall St Journal :
… Republicans methodically dismantled the cost and complexity of “cap and trade,” which sounds harmless but would inflict collateral damage on the wider economy in lost GDP and higher prices up and down the energy chain. Conveniently, the Democrats would also bestow unto Congress (read: themselves) some $6.7 trillion in new tax revenues and carbon welfare handouts over the next four decades.
Ignoring the party politics, here’s a further thought. Politicians have dithered and dithered over this issue, and by going for complex (and unworkable) schemes they may have missed the bus, at least for now. The market mechanism (at least for oil) of scarcity = high prices = alternative technologies looks like it’s kicking in and doing a far simpler and more effective job than anything the politicians could have devised, except that the financial benefits will now flow offshore. Costs from Carbon C&T or Carbon Tax schemes will raise the price of energy and flow through into the wider economy (howevermuch politicians waffle that it won’t) and I will lay odds that the costs will not be fully offset by lower taxes elsewhere, but who’s going to be brave/mad enough to impose any carbon regime in this current oil price environment? (!)
Trackback uri
Leave a Reply