Outline Form

The CBO agrees with Greg Mankiw and myself, I choosing Greg’s rather than the Director’s blog because it is better organized. The trouble is that every time Someone puts anything in outline form, I think I have to do something like it. Most will have heard a great deal of this stuff previously, but I am trying to get a Pavlovian reaction here.

1) The Carbon Tax is a Tax, not a Commandment from Heaven. People and Business can burn whatever Carbon they need to burn, and have a definite concept of the total Cost. A Cap-n-Trade adds Cost to Carbon combustion, not solely through the Permit Tax and Energy Cost, but also through the usury Costs of the artificial market set up, where Speculation and Holding positions can be expected to add Cost.

2) Startup operations for new business and industry would always first need to access the Spot market for Permits, establishing a relative Permit Demand before Permit authorities recognize their need for Permits. This could raise Startup Costs by as much as 15%.

3) Consumers would have to pay for either Carbon Tax or Cap-n-trade, there is no doubt about this element. The Carbon Tax, though, will raise Government revenues, thereby canceling potential Tax increases elsewhere. Cap-n-trade Proponents say Government revenue would be raised by Carbon Permits as well, but it is a far more insecure revenue; over time, the gap between Permit purchase price and Spot Market price for Permits will widen to approx. 2.25 times the Inflation rate in Percentage terms (don’t ask for those numbers, as I even confuse myself), before entering into the Speculative phase.

4) Governing authorities will continually be burdened by Business lobbying efforts to issue more Carbon Permits, and at cheaper Price; added to by Public demand for creation of Jobs. Nobody is likely to lobby for a higher Carbon Tax, and authorities will enjoy a respite, until such time as it is evident a higher Carbon tax need be imposed. lgl