Green Eyeshades vs. Starry Eyes: The Cap or Tax Debate

clipped from blogs.wsj.com We’ve written before that in climate policy, the devil is in the details. Last week’s post on a Congressional Budget Office report that argued a carbon tax would be far more efficient than a cap-and-trade program provoked plenty of responses. The CBO report said a carbon tax would produce emission reductions at a lower cost than a cap-and-trade system, because a tax would give industry more flexibility to target the cheapest emission cuts first. That didn’t sit well with Environmental Defense, the New York-based advocacy group that for years has led the political charge for a U.S. cap-and-trade system. The CBO analysis comparing the efficiency of a carbon tax with a cap-and-trade system has serious flaws. It highlights the drawbacks of a version of cap-and-trade that no one advocates, and bases its efficiency analysis on a faulty premise. Environmental Defense points to its own deconstruction of the CBO report the threat is catastrophic “tipping points”