Business Spectator - The great carbon debate

Title: The carbon tax - an alternative to carbon trading (출처: Business Spectator - The great carbon debate) by Robert J Shapiro, 6 Nov 2007


At the International Climate Change conference, which begins today in Sydney, keynote speaker Robert J Shapiro will argue that the current global focus on carbon trading as a means of tackling climate change is misguided. The article below is an edited extract of his paper, in Climate Change: Getting it right, published by the conference host, the Committee for Economic Development of Australia.
Tomorrow, Business Spectator will publish a second article from the conference arguing in favour of a hybrid carbon-trading policy to control greenhouse emissions in Australia."

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Carbon taxes raise the price of carbon-based energy directly, predictably and in a constant manner, imposing the greatest costs on those firms and economies that produce the most emissions. In so doing, carbon taxes create direct incentives to reduce carbon-based energy use or substitute cleaner forms of energy, until the cost of doing so is greater than the tax.

A serious cap-and-trade program applies no direct charge to emissions up to its cap, but the cap for the system is set below its current or forecast emissions.

The two approaches differ in several important ways. The critical economic distinction is that cap-and-trade directly controls the quantity of emissions, while carbon taxes directly control their price. The result is that cap-and-trade can produce a designated quantity of emissions, but with much greater potential volatility in energy and energy-related prices, while carbon taxes will produce more certain prices for energy and energy-intensive goods, but greater uncertainty about the quantity of total emissions.