Arguments for a Carbon Tax

The Carbon Tax Centre argues that carbon taxes are superior to carbon cap-and-trade systems for six fundamental reasons:

1. Carbon taxes will lend predictability to energy prices, whereas cap-and-trade systems will aggravate the price volatility that historically has discouraged investments in less carbon-intensive electricity generation, carbon-reducing energy efficiency and carbon-replacing renewable energy.
2. Carbon taxes can be implemented much sooner than complex cap-and-trade systems. Because of the urgency of the climate crisis, we do not have the luxury of waiting while the myriad details of a cap-and-trade system are resolved through lengthy negotiations.
3. Carbon taxes are transparent and easily understandable, making them more likely to elicit the necessary public support than an opaque and difficult to understand cap-and-trade system.
4. Carbon taxes can be implemented with far less opportunity for manipulation by special interests, while a cap-and-trade system’s complexity opens it to exploitation by special interests and perverse incentives that can undermine public confidence and undercut its effectiveness.
5. Carbon taxes address emissions of carbon from every sector, whereas some cap-and-trade systems discussed to date have only targeted the electricity industry, which accounts for less than 40% of emissions.
6. Carbon tax revenues would most likely be returned to the public through dividends or progressive tax-shifting, while the costs of cap-and-trade systems are likely to become a hidden tax as dollars flow to market participants, lawyers and consultants.

Other articles on carbon taxes

• Some more thoughts on a carbon tax, Economist, June 18th 2010
• Climate pioneer backs tax on carbon, nuclear power
• U.S. cap-and-trade choice inferior to carbon tax by John Kemp, a Reuters columnist, Feb 27, 2009
• Eleanor Clift Back to the Future The idea of a carbon tax, proposed by Al Gore 17 years ago, is winning new converts.
• Ireland announces  carbon tax
• France’s carbon tax proposal