Why "Cap and Tax" is false...

Here's an excerpt from a great editorial on cap-and-trade. Quite frankly, anybody who stayed past week 2 of economics, even Juco economics, should recognize this. But some people aren't that elite..

Worth reading the whole piece, but here is the relevant exerpt:

What this doesn't say is that it's not just a fee, but by way of charging actors for negative externalities they produce - it comes closer to making actors realize the true cost of their actions and builds a more efficient market. People who oppose this are basically endorsing a broken, inefficient (or in their definition, "communist") market system in which producers get to have goods for free rather than paying for them. But then again, intellectual credibility was never their strong suit.

 

No - forcing parties to internalize the true costs of their actions certainly does though.

Thanks for giving us this chestnut though, delved from the furthest reaches of your dusty tier (3?) education - I trust it will lead to you staking out a completely untenable position, looking like an idiot, then logging in as CaseyH to try to pile on and reach out of the hole you dig....I'm looking forward to it!

 

Here's another good excerpt, the conclusion of a good page on tax vs. trade (which, again, are two different things).

http://www.env-econ.net/carbon_tax_vs_capandtrade.html

Conclusions

In terms of the market failure, the negative carbon externality, both a carbon tax and carbon cap-and-trade will achieve the same level of increased efficiency by achieving the optimal abatement level at the minimum cost. The only difference is the distributional implications. The cost to the firm is lower for carbon cap-and-trade. The government receives tax revenue with a carbon tax. Both policies are preferred over techological or output standards (i.e., command and control regulation).

Note the following extensions:

Dynamic efficiency: firms have an incentive to adopt new technology to reduce their marginal abatement costs with both a carbon tax and carbon tax-and-trade.

Double dividend: Carbon taxes and auctioned permits will generate revenue for government that can be used to reduce a budget deficit or reduce in distortionary taxes on labor and/or capital.


Auctions, giveaways or both: The results of carbon cap-and-trade approach the results for a carbon tax as the extent to which permits are auctioned instead of given away to polluting firms increases. Auctions substitute for trading as high abatement cost firms have an incentive to bid higher.

 

It's not really what I "want" to call it - it's what it is.

 

it's not a tax by definition of the word "tax." They are two completely different systems - please look at the second link I provided to see why, which details the effects of a carbon tax vs. a cap & trade system. Anybody who doesn't see this is either ignorant of it or being disingenuous or both.

The current system allows polluters to impose costs on others without regard for their consequences. I build my coal plant next door to you, you have solar panels in your house and don't use my power. It causes a nasty black soot to fall on your house, which causes respiratory problems for your dog. I can pollute like crazy, passing the costs of pollution on to you, and my customers can consume like crazy, again passing the costs on to you.

That's not an efficiently functioning market - the costs are not internalized by consumers or producers and instead are being borne by third parties. The participants in the market are not paying the true price of goods - you are involuntarily subsidizing their purchase - so they have no incentive to produce or consume the optimal amout.

As far as "handouts' from washington, that already exists in the current system and you're going to have provide more evidence about how specificallly this is more vulnerable (and how it could actually produce a worse system than one that already doesn't accurately account for the costs)

 

It's the exact same concept regardless of the pollutant as far as cost allocation...the costs of carbon emissions are not borne in the current analysis by either producers or consumers, rather they are imposed on society as a whole in the form of rising temparatures (which tend to have some greater effects in tropical/coastal areas, but that's beside the main point here) which are involuntarily imposed.