The Carbon Debate

John Whitehead and I both suffer from kleptomania of stealing Posts from Greg Mankiw. Read John’s admission of Guilt, and especially the links to Greg’s Posts. What is behind Our great Theft? The real rationale lies in the fact all Three of Us attempt to express why a Carbon Tax is preferable to Cap-n-Trade. It may be that We are simply inarticulate, or more likely, that the Concepts are hard to get across.

Cap-n-Trade thinks to put an artificial limit to the use of Energy, setting an arbitrary limit to the Permits; something which can be amended about as often as One changes his Socks. Permits can be given away, in which Receiving companies automatically are given a valuable tradable Commodity. Permits can be sold at auction, thereby beginning to simulate a Carbon tax, but One which will be passed on to the Purchaser’s Customers, while higher Resale becomes a Profits-Making activity through Government regulation of the arbitrary limit of Permits issuance. It is really hard to get Congressional submission to directional devotion of Tax revenues, when auction inhibits the computation of total revenues generated. The real wrong of the Cap-n-Trade methodology comes in the realistic lack of enforcement: Ex: The Utilities call the Governing Authority on Permit Size, and states, "It is only the 10th of the Month, but Carbon Permits are too expensive, so We are going to shut off Power to LA for the rest of August; so don’t bother raising your arbitrary limit."

A simple, straightforward Carbon Tax settles many difficult problems. The Consumers are still taxed, but the rate of Tax is known and can be cursed; they would be left with the Cost of the Carbon tax anyway. No one benefits from the proposed Governmental tax, and Companies may desire to bear some degree of the tax load simply to maintain Sales volume. This brings up the further point of a visible Carbon tax does impact Consumer decisions, as Consumers hate paying excess taxes as much as Businesspeople; especially when intelligent reduction of tax payment not only reduces taxation, but also cuts Consumption Costs. A further element resides in the ability to devote tax revenues from the Carbon Tax towards Payment of already existent Government Spending, with real Citizen insistence that Politicians leave these Tax revenues alone. It also possesses the fair Side-Effect of reducing Carbon emissions by improved Private usage. lgl