The Wall St Journal has plumped for a Cap versus a Tax on carbon as a way of effectively controlling carbon emissions. Fred Krupp cites Exxon Mobil CEO Rex Tillerson who thinks a cap is superior on economic and environmental grounds. This cap is what gives us the certainty of reaching the emissions target.
From an environmental point of view, the difference is stark. A cap is a legal limit on pollution. There is no guessing what will happen — the level of emissions is set in law, and enforcement of that limit proceeds accordingly. No air pollution problem has ever been solved except by imposing a legal limit on emissions.
The economic argument is based on simplicity and flexibility.
As we work our way out of the current recession, it’s also important to remember one of the most economically elegant aspects of a cap: It is self-adjusting based on economic conditions. While a carbon tax could only be modified through the cumbersome legislative process, the market price of emissions permits under a cap will fluctuate with the economy. Costs would go down during slow economic periods (because industrial activity, and therefore demand for permits to emit pollution, would be lower) and then, when robust growth returns, incentives would automatically ramp up. Try doing that with a tax.
Wall St has less to say about social issues; the second part of the equation of ‘Cap and Share’. Why are we not surprised. Link to article
