Sunday, April 20, 2008

Carbon tax and cap and trade

Some people seems to believe that there is a significant difference between carbon tax and cap-and-trade when permits are auctioned off.
The idea that

A carbon tax will never be high enough to do the job.
but
1. Carbon cap is gradually lowered 80% by 2050.

is plain silly.
Price of permits will be equal to the tax that would do the same job. So if the carbon tax will never be high enough, price of permits will have to be astronomical.
It might be possible that increasing carbon tax without limit would not work (politically). But reducing number of carbon permits so that their price is very, very high should be easy to pass?

As a side note - the idea that CO2 emissions can be lower by 80% by 2050 are plain silly. There are very likely to be significantly increasing costs of doing so - to stop emissions won't probably be that expensive, but each additional percentage of a decrease will cost significantly more than the previous. Of course, you can easily reduce humans' carbon emission by 80% - just kill enough of them. Somehow, I don't think this is what people have in mind.

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