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Samuelson: Call it Cap and Tax
Unless we find cost-effective ways of reducing the role of fossil fuels, a cap-and-trade system would ultimately break down... Developing countries, the largest source of new emissions, won't abandon fossil fuels unless there are competitive alternatives. If we're going to use price to try to stimulate those new technologies, let's at least do it honestly.
Columnist Bob Samuelson nails it again: Unless we find cost-effective ways of reducing the role of fossil fuels, a cap-and-trade system would ultimately break down. It wouldn't permit satisfactory economic growth. Nor would it work internationally. Developing countries, the largest source of new emissions, won't abandon fossil fuels unless there are competitive alternatives. If we're going to use price to try to stimulate those new technologies, let's at least do it honestly. Most economists think that a straightforward tax on carbon would have the same incentive effects for alternative fuels and conservation as cap-and-trade without the rigidities and uncertainties of emission limits. A tax is more visible, understandable and democratic. If environmental groups still prefer an allowance system, let's call it by its proper name: "cap and tax." 1 COMMENTS:
"Tax" is a loaded political word, though, at this point. How can "cap and tax" be sold to the public as an idea? It is too closely associated with negative connotations of what a tax is.
Posted by: Yang
at June 2, 2008 4:04 AM
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