Calling for a Carbon Cap-and-Trade Bill

by Jonathan H. Adler

Despite reports that the Administration was willing to see Congress defer climate legislation, President Obama called for the enactment of a climate bill that caps greenhouse gas emissions and sets up an emission trading system.  What he didn’t say is that the type of legislation the Administration has in mind will have the same economic effect as a carbon tax and (as reported in the Washington Post), the Administration is relying upon the revenue to be generated by auctioning off the emission allowances to fund alternative energy sources and other parts of the budget to be released later this week. If we’re going to impose a de facto tax on the carbon-content of fuels, it would be better to do it directly — with a clear, transparent carbon tax offset by reductions in other taxes.

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