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A carbon tax raises a clear amount of revenue, which can be used for targeted purposes (R&D for sustainable energy) or rebated to the public in one way or another, while the revenues from a cap-and-trade system are likely to be bargained away well before the first trade ever takes place.
It’s sometimes claimed that cap-and-trade will lead to more certain emissions reductions than a tax.
The days of freely dumping greenhouse gases into the atmosphere are coming to an end, but how best to price carbon emissions remains in dispute. A broad spectrum of people concerned about global warming and U. energy independence agree on one basic truth: Sooner or later, emitting planet-warming greenhouse gases is no longer going to be free.
Congress debates the issue, Yale Environment 360 asked eight experts to discuss the merits of a cap-and-trade system versus a carbon tax.
Only a cap with strong emissions reduction targets — and clear rules for meeting them — can guarantee that we achieve the environmental goal.
Cap-and-trade also has the upper hand on the economics.
The cap-and-trade option has attracted far more attention and has many more supporters, including President Obama, key Congressional leaders, and an influential coalition of environmental groups and big businesses, including General Electric, Dow Chemical, Shell Oil, and Duke Energy.
Congressional leaders say they hope to pass a cap-and-trade bill by year’s end, but whether they can achieve that goal remains a major question.
There was disagreement on many points, but on one issue most concurred. Sachs, director of the Earth Institute at Columbia University, said, imposing some sort of price on fossil fuels “is a big improvement over the do-nothing Frances Beinecke, president of the Natural Resource Defense Council.
In the end, the discussion about a carbon tax is a distraction, because it frames the debate in fiscal policy terms — How high should the tax be? — instead of focusing on how quickly we need to reduce global warming pollution.
The crisis of global warming is so urgent that we can’t wait for lawmakers, industry, and the American people to spend years hashing out the details of an entirely new system.
Second, we have on-the-ground experience in curbing global warming pollution from cap programs, while the tax model remains entirely untested.
Caps are already being used in the European Union and in 10 Northeastern states. Both the President and Congressional leaders are focused on cap-and-trade.