A while back I wrote about two of the most widely discussed options for federal carbon legislation: a tax on individual and/or institutional emissions, and a market-based “cap and trade” system. The debate has continued to heat up in the past couple months, and I thought I’d weigh in with an update.
At yesterday’s 2010 Imperative webcast, leading climate scientist James Hansen stressed the need for immediate carbon legislation: continuing our current path for another decade, he explained, would put our emissions at 40 percent above 2000 levels, making it virtually impossible to reduce to acceptable levels without severe recession. Though he made it clear that action needs to be taken now, he refused to take a side on the tax/trade divide. What he did suggest was that CO2 restrictions be slowly phased in so as to avoid economic disruption, and that they be controlled by a nonpartisan appointee in the manner of the Federal Reserve.
Gristmill has been seeing a raging debate on the issue recently. In a guest editorial last week, Bill Chameides, Environmental Defense’s chief scientist, came out in favor of a market, calling taxes politically unfeasable and less likely to promote technological innovation. In a series of comments to my original post, fellow Green Archer Daniel Dempsey agreed, citing the precedents of NO2 and SO2 markets in the US as successful examples of market-based pollution reduction.
But Gar Lipow’s well-researched response to Chameides’ piece counters these very examples. Lipow provides evidence that domestic pollution markets were slower and resulted in smaller reductions than tax-based programs in Germany and Western Europe. Furthermore, these markets were nowhere near as complicated as a carbon trading system would have to be, and were therefore easier to implement and less subject to manipulation. In other words, if set up correctly, markets can indeed work – just not as well as taxes.
Still, one of Daniel’s criticisms still holds: to institute an effective carbon tax would be tantamount to “political suicide” in our current taxophobic political climate. Although endorsed by economists and corporations alike, to my knowledge not a single elected official has proposed introducing one, probably because it would raise the price of nearly everything we buy.
It seems clear to me that the tax vs. trade debate is essentially one of feasibility versus necessity. Emissions trading would be cheaper to implement and is far more business-friendly, which is why politicans are so fond of it. But it’s also complicated to set up, and likely to be less effective overall. To reduce our carbon quickly enough to prevent catastrophic climate change, it seems as if taxing is a safer bet. Sure, at the moment it seems as if a carbon tax is unrealistic – but then again, this very discussion would have seemed politically preposterous only a couple years ago.