THE DEBATE OF OUR TIME: THE COST OF CARBON

This is an introductory piece to the subject at the root of the Kerry-Gingrich debate earlier this week, the contention between conservatives and democrats, republicans and liberals. It is the debate of our time: Carbon Tax or Cap-and-Trade?

Key climate question: What’s the cost of carbon? Current offset prices vary from 50 cents to $30 a ton. But the U.S. Congress will have to find the optimum rate.
Mark Clayton, April 12, 2007 (Christian Science Monitor)

WHO
Government and business leaders and citizens struggling to understand the best measures with which to control greenhouse emissions

WHAT
The market price of carbon dioxide emissions: what it should cost those who emit them and what those who take steps to counteract them should be paid. An Iowa farmer presently earns 50 cents per ton, EU markets have had prices fluctuating from $1 to $30 per ton. Present legislation mandates prices from one extreme to the other.

WHEN
As U.S. government wrestles with questions of emissions disincentives and conservation and efficiency incentives, this question—be it in the form of taxation or cap-and-trade standards—must be decided.

WHERE
These questions are being asked in Washington, D.C., right now, where a national debate is heating up over American emissions regulation.

WHY
If price is set too low, polluters have no incentive to stop emitting. If it is too high, it discourages economic growth. Pollution allowances must be set fairly. Industries must be protected from price growth-stultifying fluctuations. Standards must not put domestic businesses at a disadvantage in world markets. Chinese-made autos,without the cost of carbon consumed in their manufacture, could destroy the US auto industry. Industry characteristics must be considered in making setting costs. Some industries emit once, some twice. The distribution of the revenues must benefit the marketplace being regulated. Do revenues lower taxes across the board or get directed at carbon emission control industries?

QUOTES
- "You have a lot of people right now talking in broad terms about cap-and-trade or carbon tax approaches to dealing with the problem, but a lot of them haven't gotten into details," says Andrew Bowman, director of the Doris Duke Charitable Foundation climate-change program.
- "If the amount of the allowances allocated for free exceeds the cost of reducing emissions, then you've given away a windfall gain and undermined the emissions program," says Richard Newell, professor of energy and environmental economics at Duke University in Durham, N.C. "Right now you have different legislative approaches, most of them pretty sketchy. Or [they] leave it up to agencies to figure out how allowances are handled…But I think in the end Congress will have a big hand in determining how these billions are handed out.”