This is a brief diary discussing Cap-n-Trade Vs. Carbon Tax. If responses are significant to indicate interest in this topic I will post a longer diary explaining the analysis.
Many policy analysis seems to put forward the concept that the results from Cap-n-Trade would give you the same results as a carbon tax. They come to this conclusion because economist have their cute little normalization assumptions that totally ignores the real world.
SURE – Pricing carbon does occur in both models. However pricing is only the first step of behaviour modification. The second stage is to place the cost on those who are able to affect production changes most directly. Cap-n-Trade focus that cost on the energy producers those responsible for the technology choices made, while the carbon taxes can easily be cost shifted to consumers.
Since consumers do not determine technology choices all we will have is a new government revenue source and continued growth in GHG. It’s even worse if the collected tax is reimbursed to the consumer becuase for the most part the tax is hidden while the divident isn’t and therefore the consumer percieves a win-fall.
Unfortunately carbon tax involves cost shifting away from the technology choice decision makers onto consumers and it won’t lead to a growth in clean energy at least not at the level to which Cap-n-Trade would.