Cap and trade sounds great, but would it be set low enough? I'd prefer much higher gas taxes. If we didn't have a multi trillion dollar deficit, these could be traded off vs. lower income taxes.

Cap-and-trade is a better GHG rationing mechanism than carbon tax revenue that can be wasted by goverments. It tilts the playing field towards cleaner energy by penalising heavy emitters who currently get a free pass. Thus coal fired electricity could increase 10% in price relative to wind power or nuclear. As the cap shrinks over time we would see which heavy emitters fill an essential niche. For example in 20 years time an optimum priced liquid fuel could be 85% bio with the other 15% derived from tar sands. The bio would be nearly GHG neutral but costly to produce; the fossil component would have to pay for carbon debits.

In today's NYTimes:
David Leonhardt
Buy a Hybrid, and Save a Guzzler
Published: February 8, 2006

The more time you spend looking at the economics of the hybrids, the less comfortable you get.

The most important reason is a government policy that, amazingly enough, seems almost intended to undercut the benefits of efficient cars. In 1978, Congress set a minimum corporate average fuel economy, known as CAFE, for all carmakers. ...

You can guess what this means for hybrids. Each one becomes a free pass for its manufacturer to sell a few extra gas guzzlers. ... But Toyota's trucks and the American automakers are right near the limits. So every Toyota Highlander hybrid S.U.V. begets a hulking Lexus S.U.V., and every Ford Escape — the hybrid S.U.V. that Kermit the Frog hawked during the Super Bowl — makes room for a Lincoln Navigator, which gets all of 12 miles a gallon. Instead of simply saving gas when you buy a hybrid, you're giving somebody else the right to use it.

The hybrid, then, is just about the perfect example of what's wrong with our energy policy. It's a Band-Aid that does a lot less to help the earth than we like to tell ourselves. ...

actually everyone can figure out a better policy, if you cant figure out, you can always copy some others policy. Like for small displacement cars(<2.0?), cheap tax, big hungry heavy thirsty monsters, big hungry thirsty tax bill too. A very straight forward way to discourage people to buy gas guzzle.

Cap-and-trade is a better GHG rationing mechanism than carbon tax revenue that can be wasted by goverments.

The way to keep governments from wasting carbon tax revenue is to give it all back to the citizens, so they can buy the emissions that they absolutely need.

OK E-P
how about auctioning off carbon permits rather than allocating them on the basis of pre-existing emissions? The little players will have to sell their ideas to those with serious money. There are some serious bugs in the Euro system since carbon credits can be both undeserved (eg buying unused allocations) and unreliable (eg planting forests that get burned down). The system also needs a way of penalising nonparticipants. I think it is the most business-savvy mechanism for deterring GHG emissions.

I'd rather see a carbon tax than a complicated cap and trade program. While no one likes taxes, a consumption tax on something bad for us is preferable to taxing our successes. Why do we tax income and give tax breaks to oil companies? There are market inefficiencies with any tax, but if you have to have some tax, I'd rather it be on something that discourages bad behaviors instead of one that penalizes good business decisions.
If we truly believe GHG are a serious threat, then we should put a moratorium on any new coal plants unless they are zero CO2 or offset their emissions somewhere else in the world (a modified cap and trade).

Their thinking is along the right lines, but it would be much better to simply cap and trade fuel itself.

Of the 7.1 billion metric tons CO2 equivalent emissions in the US in 2004, about 1/2 was from residential and transportation CO2 emissions.

So, it wouldn't be too hard to backstep that to the primary fuel consumed and simply allocate a set amount per capita, gradually decreasing it over time. People who consume below the per capita amount could then sell their excess to people who want to consume more than their "fair share", and price could be dictated by demand. No need to monkey around with the fuel efficiency ratings of vehicles, personal choices and ethics, etc -- just reward people for living more lightly and make people pay a premium for going heavy.

There could also be a price floor set on things like gasoline and then governments could also capture the difference between wholesale prices and the retail price floor -- which would get larger as less was consumed.

Wouldn't be too hard to institute this with any form of fuel consumption. Applying it to commercial, industrial, and non-personal transportation might be a bit trickier, but the same principle could be applied.

The only difficulty, obviously, is that demand slackening on the US's part would depress international prices and spur more demand in other nations which might not have the same cap and trade system in place. So, it would also make sense to apply the same logic in terms of rewarding other countries for working within a global cap and trade mechanism that gradually shifted us away from fossil fuels.

"Instead of simply saving gas when you buy a hybrid, you're giving somebody else the right to use it."

Not really, unless of course somehow people are forced to purchase inefficient vehicles for each efficient one produced.

Not many sillier things than another foolish article that bashes hybrids.

So, it wouldn't be too hard to backstep that to the primary fuel consumed and simply allocate a set amount per capita, gradually decreasing it over time. People who consume below the per capita amount could then sell their excess to people who want to consume more than their "fair share", and price could be dictated by demand.

We've heard "Cap-and-trade is better", "No, carbon tax is better", "No, fuel cap-and-trade".

Cap-and-trade (C&T) at the manufacturer level, like CAFE, results in more efficient vehicles. It does not necessarily result in lower emissions, because people can drive more miles per vehicle -- and in fact, U.S. consumer cars are driven 15K miles/yr on average now, vs. 10K miles when CAFE was first adopted. It would be interesting to see miles/year averages and lifetime totals vs. gas mileage of vehicles -- I'd guess we would see much heavier use of lower-mileage vehicles.

Fuel C&T does produce incentives for individual reductions in consumption. But then, how do you keep track of each citizen's carbon consumption? This would get very bureacratic very fast, and raise complicated privacy issues.

A carbon tax gives direct incentives to reduce personal carbon consumption and GHG release, without the bureaucracy. All of the advantages Aussie describes for cap-and-trade also apply to carbon tax (penalizes heavy emitters, result in optimal fuel mixtures, etc.). The only downside is more government revenue which is "wasted".

Government waste is a result of bad management and leadership, not more revenue opportunities. Under Clinton, we had more revenue and lower government spending (fraction of GDP shrank). Under Bush, we have less revenue and more spending, and not only on Iraq: in his first two years alone, non-defense discretionary spending ballooned from $300B to $420B! The point being, new revenue sources are not coupled to more waste, in fact the trend in the last 25 years has been the opposite (in the U.S. at least).

All of these things considered, the carbon tax has every advantage in terms of more direct incentives to reduce fuel use and GHG emissions, without the bureaucracy and privacy issues of fuel C&T. There's just one problem: it's hard to pass new taxes!

[q->t to email]

"Fuel C&T does produce incentives for individual reductions in consumption. But then, how do you keep track of each citizen's carbon consumption? This would get very bureacratic very fast, and raise complicated privacy issues."

Well, for automobile fuel specifically, you'd just integrate it into existing credit cards, have a separate card, or use some other electronic means of IDing oneself and relating that to your quota. Then you'd simply have some sort of financial mechanism for mediating the buying and selling of credits. Not hard with today's technology. As for privacy - again, that's solvable with good design. It's not like you need to track where people are going moment to moment. It's just a matter of point of sale.

It'd be even easier to do this from the utility bill for residential consumption.

"So you'd be happy paying money to Robert Mugabe and Kim Jong Il for keeping their per-capita consumption below yours?"

No, I'd much rather we consume vast amounts of oil indefinitely and send billions to Saudi Arabia and Iran, fuel radical Islam, and then perpetuate a creeping police state in the United States. Obviously that's the proper course of action.

I have a suggestion for you - why don't you simply pay attention to what people are actually saying (eg, in this case a proposal to make the cap and trade system applicable on the individual and not the state level) instead of doing your usual dance and misunderstanding then flaming?

Or perhaps you just like being an ass on every single website you choose to infect with your condescending snark - in which case, you can forget my suggestion about taking your time to understand what people are saying in hopes of actually having mature dialog about complex issues.

If you can't bother to think past the consequences of your suggestions, it's your problem.

Like your "not hard to do with today's technology" carbon credit scheme.  It would imply a huge parallel financial system (because credits trade for dollars), and you have no idea how much the current one costs to maintain or change.  Compared to a carbon tax, which is just an increase in taxes we already collect and have all the systems in place, it's horrendously expensive.

First rule of engineering: Keep It Simple, Stupid.

"If you can't bother to think past the consequences of your suggestions, it's your problem."

I guess I'll use smaller words and speak more slowly, since you still haven't got it.

You did not understand what I said. Or, you are misrepresenting what I said.

Take your pick.

Then, if you want to discuss my ideas as I presented them (not as you're screwing them up), then that would form the basis of a discussion. Otherwise, it's just your same old socially retarded behavior.

"Like your 'not hard to do with today's technology' carbon credit scheme. It would imply a huge parallel financial system (because credits trade for dollars), and you have no idea how much the current one costs to maintain or change."

It's as "complicated" as PayPal. People hold accounts and have credits and debits from them. Not a big deal. Again, if you actually understood what I was saying instead of just looking to bash, then there'd be the basis for something.

As for the remainder of your insults - there it is. Good luck with that approach.

Unless carbon taxes are implemented globally, large users like industry will simply move their investment to countries with the lower tax regimes. How big would the carbon tax need to be, to be effective? In the past seven years, the price of oil and natural gas has increased by about 4 times without any positive effect on global CO2 emissions. The 911 terrorist attacks and recession problably had more effect on CO2 emissions than anything else in recent years.

Large energy users are able for the most part, to pass on higher energy costs to their customers. Unfortunately, it looks like the only things that will significantly reduce CO2 emissions are; running out of fossil fuels, regulation, or voluntary action. As for regulation, economists like cap and trade schemes because they harness the intellect of the population. But the regulation needs to be well designed or there will be unintended consequences.

Regarding the comment that a carbon trading scheme would be too costly; state and national governments today deal with a wide range of taxes and tarifs that cost billions to manage. If society decides that regulating CO2 emissions is worth doing, they'll pay the few billion that it will cost to run the system. If the system is designed properly, the big traders will pay most of the costs.

I don't think a system that prevents you from buying fuel unless you use a government-issued credit card thing will go over too well with most Americans, especially the freedom-loving variety. Increasing the tax on fuel has a better chance of being implemented, although as has been mentioned would still be difficult to convince people it's a good thing.