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CO2 tax or cap-and-trade system?

Steve Henn Nov 1, 2007


Scott Jagow: There’s a debate in Washington about the best way to get companies to cut back their carbon emissions. Should we tax CO2 emissions, or cap the amount of carbon dioxide companies can emit, and then let them buy and sell the right to pollute? Weighing in on it today: the Congressional Budget Office. Here’s Steve Henn.

Steve Henn: Advocates of a tax say it’s simpler and fair. Advocates’ of a so-called cap and trade system argue it lets the markets work, rewarding green companies for cleaning up while penalizing big polluters.

But with cap and trade, the devil’s in the details. Should polluters have to purchase the right to pollute from the government in an auction, or should pollution credits be given away?

Fred Krupp runs the advocacy group Environmental Defense:

Fred Krupp: In many ways, an auction is preferable.

But Krupp says it’s more important to get the system going and set some limits on carbon pollution right away.

Ken Green at the American Enterprise Institute isn’t convinced:

Ken Green: It certainly can’t hurt to examine the costs of cap and trade.

Today, the Congressional Budget Office is expected to weigh in, saying cap and trade isn’t free. Even if the government gives away pollution credits, Green says there would be a big cost to the economy. Some estimate those costs could hit $50 billion a year or more.

In Washington, I’m Steve Henn for Marketplace.

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