Cap and Trade or Carbon Tax? Which will you decide?

Cap and Trade or Carbon Tax? Which will you decide?

According to NASA, 97% of scientists agree that climate change is happening. It is due to human activity and fossil fuel emissions, in particular carbon emissions. With such an overwhelming consensus on climate change, the issue requires more than individualized attention. Governments have attempted to tackle this issue through many different solutions, most notably cap and trade and a tax on carbon. Both solutions have strengths and pitfalls and to compare and contrast them only makes climate change policy more effective.

With  cap and trade, a regulating body, like the government, creates a ceiling or cap on emissions. In an effort to completely eliminate carbon emissions, the government will continually lower the ceiling. Furthermore, the market is given credits on how much they can pollute. Companies are allowed to buy, sell, and trade these credits as long as it all remains under the cap. In 2009, a plan for carbon cap and trade made it through the House of Representatives but not the Senate. During that time, scientists and experts spoke about the pros and cons to a carbon cap and trade. Even though this bill happened almost ten years ago, analyzing cap and trade has a meaningful place in today’s society, especially with the eminent and controversial nature of climate change.

These experts interviewed with Yale Environment 360, the academic journal by Yale School of Forestry and Environmental Studies. The journal outlines the strength and pitfalls of carbon cap and trade.  Frances Beinecke, president of the National Resource Defense Council, and Fred Krupp, the President of the Environmental Defense Fund, state that with a carbon cap and trade there will be a set limit that will be continually lowered as opposed to a vague limit reached by a tax. Secondly, it only makes sense to put the resources of the private sector to work. The private sector has immense amounts of money and power. Usually, it has to be in support of a legislation for that legislation to get passed. Furthermore, it is simpler and more efficient to work within a system already in place to make it better. Using the resources of the private sector utilizes the system already in place of regulated trading, so even if it isn’t perfect it is doing something more than the “business as usual approach.” To these experts, cap and trade isn’t the final or perfect solution but it is on the right track. Cap and trade has also worked in other countries like the European Union and on the state level with California. Therefore, there was a chance it could work on a national scale. Currently, China is looking into a carbon cap and trade policy in the wake of the United States leaving the Paris Climate Agreement.

On the other side of this debate, advocates of the carbon tax argue a lack of trust in the private sector to actually follow through with any sort of emissions cap and trade. Jeffrey Sachs, director of the Earth Institute at Columbia University, thinks cap and trade would not work because it is not a large enough scale. Cap and trade only cover the private sector which does not account for other places where significant pollution occurs, like households and transportation. Others, like Roger A. Pielke professor of environmental studies at the University of Colorado, states that even if cap and trade would be effective enough policy within the private sector it would still cause devastation to the economy. A concern is that  if you cap carbon emissions,  it will raise energy costs and in turn raise costs throughout the entire economy. Many countries such as Ireland and Australia have implemented a carbon tax, however the United States is not one of them. It is difficult to critique when it has not been implemented in any capacity to the United States economy. However, advocates of the carbon tax can remain hopeful because organizations like Citizens’ Climate Lobby are continuously fighting for a tax on carbon and Exxonmobil recently voiced support for a carbon tax.

Often times, cap and trade and a carbon tax are put in an adversarial frame. It is the idea of a free market solution with cap and trade versus a government solution of taxing. In actuality, these policies do not have to be at odds with one another. Quite the contrary, they can work together and feed off each other’s momentum. Cap and trade has the ability to move the world forward with climate change policy now. Climate change is a time sensitive issue in the world and requires action immediately. While it sounds like a carbon tax has the ability to create more widespread change, the entire government has to agree and it cannot be shut down by private sector lobbying.  Then an entirely new system of regulation has to be put in place. Cap and trade creates a functioning system of rewarding emission reduction in one of the most polluted sectors in the world. The regulating system could be monitored through the EPA who already does emission regulations. Even though cap and trade has some notable flaws it utilizes both the public and private sector in an attempt to create lasting climate change policy. Cap and trade cannot make people complacent and apathetic towards climate change. It must instead mobilize people towards climate action because they see that environmental policy is possible. Hopefully a cap and trade policy can pave the way for a carbon tax in the United States.