The Economic Policy Risks of Cap-and-Trade Markets for Carbon Emissions
As federal lawmakers scramble to meet the aggressive deadlines they’ve announced for cap-and-trade legislation, they must still recognize the importance of taking the steps necessary to review proposed policies with a critical eye. In order to successfully mitigate the affects of global warming, the White House and Congress must first assess the ability of government policy, regulator responsibility and market mechanisms to deliver a stable carbon price.
In this report, Dr. Joseph R. Mason — Hermann Moyse Jr./Louisiana Bankers Association endowed professor of banking at Louisiana State University — examines the two most prominent approaches for mitigating carbon emissions: controlling the quantity of emissions through cap and trade schemes (cap and trade) and establishing price incentives for reducing emissions through a tax on carbon (carbon tax). By analyzing which program provides the most effective means of curbing pollution while also minimizing economic distortions, Dr. Mason concludes that a carbon tax-shift is the most cost-effective policy option.