Comments on: Sliding Cap-and-Trade into Bailout, and pissing off conservatives http://www.acouplethings.com/blog/2008/12/sliding-cap-and-trade-into-bailout-and-pissing-off-conservatives/ A couple things about politics, sports, travel, and other stuff. Fri, 19 Mar 2010 17:27:13 -0700 http://wordpress.org/?v=2.8.6 hourly 1 By: Mohammed Alam http://www.acouplethings.com/blog/2008/12/sliding-cap-and-trade-into-bailout-and-pissing-off-conservatives/comment-page-1/#comment-2852 Mohammed Alam Wed, 03 Dec 2008 21:48:25 +0000 http://www.acouplethings.com/blog/?p=2885#comment-2852 About a shortcut to cap 'n trade - people have argued for a while that the Clean Air Act's mandate effectively includes GHGs, so we should use the existing cap 'n trade system we have for sox and nox and use it control GHGs. I can see the administration being successful in broadening the definition of emissions in the act, but I do not think it will be as easy as the Atlantic/Ambinder is depicting. That will be a drastic change and as soon as the administration tries to do that, there will be immediate law suites, which will slow down the main task of controlling climate change. I am not against using the CAA to control GHG. The point is that, either choice (Carbon Tax or Cap 'N Trade) would face political challenges and there are no short cuts. On Nader's ideas on global carbon tax, here are some observations - (1) it assumes that we will be able to have a global carbon tax in all countries - highly ambitious assumption. If we can achieve that before the planet is extinct, I think it will be the superior solution over credit trading; (2) It assumes that there will be no reciprocity between the national/pan regional credit trading systems. I think that countries/regions will be willing to cooperate in carbon trading between national/regional boundaries and there is some precedence already; (3) The carbon tax approach is very elegant on the surface and it tells a "clean" story, but it is horrendously inefficient in assessing taxes in relation to the source of CO2 emission. Taxing at the "bottlenecks" seems intuitive and elegant, but not that straightforward or efficient. For example, under Nader's plan, you will charge a tax on Nat Gas on the trunk lines, but after the gas gets out of the trunk lines, it can be consumed for various applications, while each of those applications will have a different emission intensity. So a new gas fired power generator will produce less CO2 than an old generator or a power generator may produce less CO2 than a nat gas fuelled car, per btu of energy usage. On top of all this, there are pricing issues. How do you determine an effective tax rate for CO2 in such a inefficient system? About a shortcut to cap ‘n trade – people have argued for a while that the Clean Air Act’s mandate effectively includes GHGs, so we should use the existing cap ‘n trade system we have for sox and nox and use it control GHGs. I can see the administration being successful in broadening the definition of emissions in the act, but I do not think it will be as easy as the Atlantic/Ambinder is depicting. That will be a drastic change and as soon as the administration tries to do that, there will be immediate law suites, which will slow down the main task of controlling climate change. I am not against using the CAA to control GHG. The point is that, either choice (Carbon Tax or Cap ‘N Trade) would face political challenges and there are no short cuts.

On Nader’s ideas on global carbon tax, here are some observations – (1) it assumes that we will be able to have a global carbon tax in all countries – highly ambitious assumption. If we can achieve that before the planet is extinct, I think it will be the superior solution over credit trading; (2) It assumes that there will be no reciprocity between the national/pan regional credit trading systems. I think that countries/regions will be willing to cooperate in carbon trading between national/regional boundaries and there is some precedence already; (3) The carbon tax approach is very elegant on the surface and it tells a “clean” story, but it is horrendously inefficient in assessing taxes in relation to the source of CO2 emission. Taxing at the “bottlenecks” seems intuitive and elegant, but not that straightforward or efficient. For example, under Nader’s plan, you will charge a tax on Nat Gas on the trunk lines, but after the gas gets out of the trunk lines, it can be consumed for various applications, while each of those applications will have a different emission intensity. So a new gas fired power generator will produce less CO2 than an old generator or a power generator may produce less CO2 than a nat gas fuelled car, per btu of energy usage. On top of all this, there are pricing issues. How do you determine an effective tax rate for CO2 in such a inefficient system?

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