Some benefits of cap and trade can't be replaced
While there are many policy tools needed to address climate change, there are benefits to cap-and-trade systems that can't be replaced. First and foremost, there is the cap: legislating a limit on emissions is the only way to guarantee the outcome - emissions below an agreed level. Carbon taxes may prove insufficient to incentivize the needed reductions. Subsidies may support low-emitting technologies but they will not necessarily drive out the emitting options. Regulations on minimum standards can be useful for some technologies, especially cars and buildings, where consumers are less responsive to price signals in fuel costs. But for other technologies such as power plants and factories they can cause unintended consequences, as unregulated plants and sectors pick up production or have their lifetimes extended to get around the rules.
The other major benefit is cost efficiency -- emitters can decide themselves how to meet the goal in a way that minimizes their costs. The concerns in the U.S. and elsewhere about the costs of a cap-and-trade system are misguided; to achieve the same environmental outcome, cap and trade is almost certain to cost less than the other options named above. Those other options are perceived as cheaper because they do not make the same promise: to deliver the reductions. But if you are going to pay something to achieve an environmental objective, actually achieving it should be job number one.
Posted by: AGWsceptic99 | March 22, 2010 1:13 AM
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