Energy tax versus cap-and-trade

Michigan Rep. John Dingell appeared to be calling the bluff of Congressional Democrats by proposing a steep carbon tax which he figures will be unpalatable to American citizens, showing how unrealistic House leadership climate control goals are. Political positions on Capitol Hill on climate policy are varied and often self-deceived.

For the free market to work, energy must be priced to reflect its full cost, including the high cost of its side effect of global warming. Most of this cost will be borne by consumers, whether the policy is "cap-and-trade", a "carbon tax" or some hybrid. (The expenses can be substantially compensated for consumers if pollution allowances are auctioned off instead of being given away to corporations, or if the carbon tax is the chosen policy instrument–which is one reason economists prefer it).

True-cost pricing for global warming pollution automatically triggers market mechanisms like conservation, investment in efficiency, and research and investment in renewable energies, and it does so in every sector, from households, to corporations, to governments.

But climate policies can be designed so that the livelihoods of those most impacted by the higher energy costs are protected. The ECI campaign tackles this issue head-on, instead of pretending it doesn’t exist.

"Counting on failure, energy chairman floats carbon tax," by Edmund L. Andrews, New York Times, July 7, 2007

http://www.nytimes.com/2007/07/07/washington/07carbon.html

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