I was recently asked to become a contributor to the National Journal‘s Energy and Environment blog, joining contributors from the environmental community, government and business trade groups to debate the future of environment and energy legislation.
Here is an adapted excerpt from my first post for the National Journal outlining why I believe a cap and trade approach to climate change legislation is preferable to a carbon tax:
1. We need action soon, and cap-and-trade is more likely to pass.
Evidence mounts that carbon dioxide levels in our atmosphere are increasing more rapidly than projected bringing us closer to unmanageable climate problems. U.S. action to reduce emissions is needed soon. But while the obstacles to enacting cap-and-trade legislation are substantial, enacting a carbon tax in the current political environment seems unlikely. (Indeed, many of those who suggest it is preferable to a cap-and-trade approach are not clear that they themselves would support a tax.) Shifting the policy discussion from a cap to a tax could engender years of delay.
2. Taxes are complicated.
While a carbon tax might be simpler at face value, there is nothing simple about the U.S. tax code. A carbon tax would likely soon be tangled up with other tax code provisions and with revenue raising objectives not related to energy and climate change. In the process, its impact in driving carbon reductions could be lost or diluted.
3. Cap-and-trade can be scaled up.
Climate change is a global problem and requires a global response. U.S. cap-and-trade legislation can be informed by, relate to and influence cap-and-trade initiatives already in place in Europe and can ultimately be part of a global standard. It can catalyze greater action by and help build mitigation infrastructure in other countries — both those with caps themselves, and those that participate in offsets mechanisms, such as the Clean Development Mechanism under Kyoto.
Unless our actions here in the United States inspire similar actions among other large emitters of carbon, our efforts to reverse climate change will be lost. It is not clear how a tax would achieve this result. Suggestions that carbon taxes could be harmonized across national borders would immediately run into long-standing opposition to tax harmonization, as well as challenges stemming from the vastly different taxation systems deployed by different countries.
4. Cap-and-trade could be used to reduce deforestation.
A cap-and-trade program could credit successful efforts to reduce deforestation as well as other mitigation opportunities in developing countries.
Deforestation is contributing 20 percent of global greenhouse gas emissions, and in many developing countries it accounts for an even higher proportion. Allowing measurable and verifiable reductions in deforestation (and, potentially, reductions in the loss of other natural systems) against a pre-determined baseline to be credited in a U.S. cap-and-trade program would be a cost effective way to lower emissions.
This could help reduce costs for American businesses and consumers by allowing relatively inexpensive reductions to be credited against emissions here. Such forest offsets would increase incentives for developing countries to participate in an international treaty that significantly limits global emissions.
Want two more reasons why cap-and-trade is better than a carbon tax? Head over to my National Journal post to read more.
(Image: Deforestation in Papua New Guinea. Credit: Mark Godfrey/TNC.)