Progressive Carbon Pricing

The excellent Peter Orszag explains how to make a cap-and-trade plan have progressive distributional impact. People should listen to Peter Orszag.

Comments

I have a question concerning the economic impact of curbing CO2.

Many years ago, we decided that it would be illegal to dump toxic waste into our waterways and aquifers. Despite that, the economy thrived. We put limits on the emmission of CO, SO2, and NOx. There is a huge list of other gases that can't be vented. We put emissions limits on cars in most states. We stopped the sale of leaded gasoline. You can't bury solid waste wherever you wish on your property without a proper permit.

So how come limiting CO2 will destroy the economy, when so many other limits we put in for our safety did not? Why is this one so different?

Posted by LFC | June 27, 2008 11:45 AM

Many years ago, we decided that it would be illegal to dump toxic waste into our waterways and aquifers. Despite that, the economy thrived. We put limits on the emmission of CO, SO2, and NOx. There is a huge list of other gases that can't be vented.

You could argue that it did 'destroy' - more precisely, was one of many factors that impacted - the economies of the rust belt and manufacturing in general. Since you basically *can* do all this stuff in China, that's where the economy (again, specifically, cheap and dirty manufacturing) is thriving. Now it's a tradeoff I'm willing to make (and China will clean up its act as is gets richer, re-equalizing things) , but nonetheless, still a tradeoff.

Posted by Kolohe | June 27, 2008 12:10 PM

Since you basically *can* do all this stuff in China, that's where the economy (again, specifically, cheap and dirty manufacturing) is thriving.

I'm going to go out on a limb and speculate that "cheap" has considerably more to do with "price of labor" than it does with "dirty" (thought the latter is certainly a factor).

Keep an eye on Canada, a major (per capita) carbon emitter that is gearing up for an epic debate between cap and trade and a carbon tax. The incumbent Conservative party is planning to implement cap and trade, while the opposition Liberals are proposing a "Green shift"--i.e. a revenue neutral shift from income and corporate taxes (both production taxes) to a carbon tax (a consumption tax).

The fact that the Liberal leader, Stephane Dion, is a poor communicator and a hopeless salesman makes the Carbon tax a long shot, but if nothing else it will be interesting to see how the public reacts to arguments from both sides.

Posted by Geoff | June 27, 2008 1:38 PM

On NPR last night I heard a very bizarre BBC special that dealt with cap and trade programs (among other things) on an international level. I think somebody was paying the BBC to voice opinions that reactionaries think we liberals have (e.g. being "levelers" just as Dr. Johnson depicted them and using our concern for the environment as merely a way to maintain privilege and prevent the poor from getting ahead) ... the BBC program was very much biased against cap and trade schemes but ultimately their beef with them seemed to be that they enabled some people in India to make money (that was being donated to charitable causes in India).

Posted by DAS | June 27, 2008 2:27 PM