20 April 2013

Why a Carbon Tax is Better than a Carbon Market, Part 3.1415926

The EU which has the largest and most ambitious carbon market world, has effectively shut it down by refusing to subsidize it:
The European Parliament this week voted 334-315 (with 60 abstentions) against a controversial "back-loading" plan that aimed to boost the flagging price of carbon, which since 2008 has fallen from about 31 euros per tonne to about 4 euros (about $5.20). Since the vote, the price has fallen even farther, to 2.80 euros. The collapsing market is hardly the kind of firm foundation needed for building a clean-energy economy.

"Now, the market is dead, as far as I can see," said Steffen Böhm, director of the Essex Sustainability Institute at Britain's Essex Business School.

What will be the aftermath of the ETS collapse? Here's a quick primer on what happened, and what it could mean elsewhere, particularly in California, which inaugurated a new carbon market at the start of this year. (Related: "California Tackles Climate Change, But Will Others Follow?"
The "backloading" is an indirect subsidy which would pull carbon credits off of the market to raise prices.

Cap and trade does not work without extensive government intervention, it costs more to administer, and it requires extensive and ongoing government subsidies.

Tell me again why cap and trade is better than a carbon tax again?

The only thing that I can figure out is tribalism:  It allows politicians to create yet another mechanism for them to throw profits toward their classmates from their "elite" schools who are working at Wall Street or the City of London.


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