Alternate Carbon Cap-and-Trade Proposals

Amid congressional concerns that a cap and trade system for carbon would allow Wall Street to create a carbon market for its own profits, many representatives are favoring a ‘cap-and-dividend’ system, which would cap carbon dioxide emissions and require companies to pay for their credits or allowances. The money raised would be distributed to taxpayers, who likely would face higher utility bills as utilities pass along the added costs of curbing greenhouse gases. This is only one of many proposed alternates to the cap-and-trade system currently favored by the White House.

Other Democrats have produced an outright tax on carbon dioxide emissions, which Economists are suggesting that the implementation of a traditional cap-and-trade system would create a new $100 billion dollar market by 2012 while a carbon taxing system may have an adverse impact on the already delicate economy. The Carbon Tax Center (while they have a clear bias) suggest six potential benefits to a carbon tax versus cap-and-trade systems.
1. Taxes will lend predictability to energy prices.
2. Taxes will provide quicker results.
3. Taxes are transparent and easier to understand than cap-and-trade.
4. The simplicity inoculates it against the perverse incentives and potential for profiteering that will accompany cap-and-trade.
5. Taxes address all sectors and activities producing carbon emissions.
6. Taxes can produce a far more equitable result than cap-and-trade.

Obama’s plan is touting many benefits for the country, including sparing consumer electricity costs, adding non workers to the refund flow and creating a cleaner, healthier economy. He would extend a special tax credit to almost 95% of Americans, almost immediately putting money into the pockets of the working Americans. This plan will also create thousands of new jobs for Americans, a very important goal to the Obama Administration. While Obama works hard to pass the legislation, House Republicans are less than satisfied, saying that it is still incomplete. They say that the draft cannot yet be discussed because it doesn’t ‘address how permits to release greenhouse gases will be distributed’. They claim that the cost of the legislation will depend on if the permits will be sold or given away for free. There are obviously many ways to accomplish this environmental goal and the best method must be established before passing any hasty legislation that won't do that job correctly.