Last updated on: 9/24/2020 | Author: ProCon.org

Should the US Implement a Carbon Cap and Trade System?

General Reference (not clearly pro or con)

Union of Concerned Scientists, in a Jan. 8, 2017 article, “Carbon Pricing 101,” available at ucsusa.org, stated:

“Under a cap-and-trade program, laws or regulations would limit or ‘cap’ carbon emissions from particular sectors of the economy (or the whole economy) and issue allowances (or permits to emit carbon) to match the cap. For example, if the cap was 10,000 tons of carbon, there would be 10,000 one-ton allowances. A declining emissions cap would help reduce emissions over time.

Every source of emissions subject to the cap (for example, power plants or refineries) would be required to hold allowances equal to the emissions they produce. Power plant operators could acquire allowances through an auction (where they bid for the allowances they need) or allocation (where they are given a set number of allowances for free).

Once these entities have allowances, they would be able to trade or sell allowances freely among themselves or other eligible market participants. Because the allowances are limited and therefore valuable, those subject to the cap will try to cut their emissions as a way to reduce the number of allowances they have to purchase. The resulting interaction between the demand and supply of allowances in the market determines the price of an allowance (also known as the carbon price).”

Jan. 8, 2017

The US Congressional Budget Office (CBO) stated the following in its Feb. 2008 study “Policy Options for Reducing CO2 Emissions,” available at www.cbo.gov:

“Under a tax, policymakers would levy a fee for each ton of CO2 emitted or for each ton of carbon contained in fossil fuels. The tax would motivate entities to cut back on their emissions if the cost of doing so was less than the cost of paying the tax. As a result, the tax would place an upper limit on the cost of reducing emissions, but the total amount of CO2 that would be emitted in any given year would be uncertain.

In contrast, under a cap-and-trade program, policymakers would set a limit on total emissions during some period and would require regulated entities to hold rights, or allowances, to the emissions permitted under that cap. (Each allowance would entitle companies to emit one ton of CO2 or to have one ton of carbon in the fuel that they sold.) After the allowances for a given period were distributed, entities would be free to buy and sell the allowances among themselves. Unlike a tax, a cap and- trade program would place an upper limit on the amount of emissions, but the cost of reducing emissions would vary on the basis of fluctuations in energy markets, the weather (for example, an exceptionally cold winter would increase the demand for energy and make meeting a cap more expensive), and the technologies available for reducing emissions.”

Feb. 2008 - Congressional Budget Office (CBO) "Policy Options for Reducing CO2 Emissions"

PRO (yes)

Pro

Nathaniel Keohane, PhD, Senior Vice President, Climate, and Kelley Kizzier, Associate Vice President for International Climate at the Environmental Defense Fund, in an article, “How cap and trade works,” accessed on Sep. 24, 2020 and available at edf.org, stated:

“The best climate policy — environmentally and economically — limits emissions and puts a price on them. Cap and trade is one way to do both.

It’s a system designed to reduce pollution in our atmosphere.

The cap on greenhouse gas emissions that drive global warming is a firm limit on pollution. The cap gets stricter over time.

The trade part is a market for companies to buy and sell allowances that let them emit only a certain amount, as supply and demand set the price. Trading gives companies a strong incentive to save money by cutting emissions in the most cost-effective ways…

In the United States, California’s climate policies have led to a steady decline of the state’s carbon dioxide pollution. The centerpiece is the cap-and-trade program, which EDF has helped design and implement.

California’s emissions from sources subject to the cap declined 10% between the program’s launch in 2013 and 2018. Meanwhile, the state’s economy is thriving [PDF].

Cap and trade makes even deeper cuts possible when countries cooperate, such as the United States and Canada. California and Quebec connected their systems in 2014, building a strong market that shows great potential.”

Sep. 24, 2020

Pro

The United States Climate Action Partnership (USCAP), an environmental and business group partnership, stated in its Jan. 22, 2007 report “A Call For Action: Consensus Principles and Recommendations from the US Climate Action Partnership,” available at its website:

“Our environmental goal and economic objectives can best be accomplished through an economy-wide, market-driven approach that includes a cap and trade program that places specified limits on GHG [green house gas] emissions. This approach will ensure emission reduction targets will be met while simultaneously generating a price signal resulting in market incentives that stimulate investment and innovation in the technologies that will be necessary to achieve our environmental goal. The U.S. climate protection program should create a domestic market that will establish a uniform price for GHG emissions for all sectors and should promote the creation of a global market…

Congress should specify an emission target zone aimed at reducing emissions by 60% to 80% from current levels by 2050…

Legislation should permit entities subject to the cap to meet part of their obligations through the purchase of verified emission offsets from a range of domestic sinks, domestic sources of emissions that are not subject to the cap, and projects outside the US. The offset must be environmentally additional, verifiable, permanent, and enforceable.”

Jan. 22, 2007 - United States Climate Action Partnership (USCAP)

Pro

Lisa Jackson, MS, Administrator of the Environmental Protection Agency (EPA), provided the following testimony on Apr. 22, 2009 at the US House Committee on Energy and Commerce Hearings on The American Clean Energy and Security Act of 2009, available at the Energy and Commerce Committee website:

“[The Cap and Trade provisions of the American Clean Energy and Security Act] would put in place a declining cap on greenhouse-gas pollution. That market-based system aims to protect our children and grandchildren from severe environmental and economic harm, and great threats to national-security while further invigorating advanced, American energy industries…

Now, the ‘no, we can’t’ crowd will spin out doomsday scenarios about runaway costs. But EPA’s available economic modeling indicates that the investment Americans would make to implement the cap-and-trade program of the American Clean Energy and Security Act would be modest compared to the benefits that science and plain common sense tell us a comprehensive energy and climate policy will deliver.”

Apr. 22, 2009 - Lisa Jackson, MS

Pro

The Blue Green Alliance, and environmental group and labor union alliance, stated in their Mar. 2009 publication “Policy Statement on Climate Change Legislation,” available at its website:

“In response to deepening economic and climate crises, the Blue Green Alliance and its labor and environmental partner organizations — including the United Steelworkers, Sierra Club, Communications Workers of America (CWA), Natural Resources Defense Council (NRDC), Laborers’ International Union of North America (LIUNA) and Service Employees International Union (SEIU) — strongly advocate for domestic energy and climate change legislation that will rapidly put Americans back to work with millions of jobs building the clean energy economy and reducing global warming emissions to a level necessary to avoid the worst effects of climate change…

Within this context, the Blue Green Alliance and its partners urge the passage of comprehensive cap-and-trade climate change legislation in 2009…

Climate change impacts and higher energy costs that may accompany a policy that puts a price on greenhouse gases will affect different sectors of our population and regions of our country unequally. Climate change legislation must provide a variety of mechanisms that offset rising energy costs to low- and moderate income Americans and adversely impacted regions of the country. Such mechanisms might include energy efficiency programs, energy rebates and dividends, and tax credits and fiscal incentives for investment in the new energy economy…

We believe in the basic responsibility of government to lead in funding the transition to a clean energy economy. Cap-and-trade auction revenues are one source of those funds.”

Mar. 2009 - Blue Green Alliance

Pro

David Schoenbrod, LLB, Trustee Professor of Law at New York Law School, and Richard B. Stewart, LLB, John Edward Sexton Professor of Law at New York University School of Law, stated in their Aug. 24, 2009 article “Cap-and-Trade Bait and Switch,” published in the Wall Street Journal:

“As a candidate for president in April 2008, Barack Obama told Fox News that ‘a cap-and-trade system is a smarter way of controlling pollution’ than ‘top-down’ regulation. He was right. With cap and trade the market decides where and how to cut emissions. With top-down regulation, as Mr. Obama explained, regulators dictate ‘every single rule that a company has to abide by, which creates a lot of bureaucracy and red tape and often-times is less efficient.’…

A cap and trade can be used to tackle carbon emissions more efficiently than top-down micromanagement of technology.”

Aug. 24, 2009 - David Schoenbrod, LLB Richard B. Stewart, LLB

Pro

Robert N. Stavins, PhD, Director of the Harvard Environmental Economics Program, stated in his Oct. 2007 study “A U.S. Cap-and-Trade System to Address Global Climate Change,” available at the Harvard University website:

“The need for a domestic U.S. policy that seriously addresses climate change is increasingly apparent. A cap-and-trade system is the best approach in the short to medium term…

[M]omentum is clearly building toward enactment of a domestic climate change policy. But there should be no mistake about it: meaningful action to address global climate change will be costly…

The environmental effectiveness of a domestic cap-and-trade system for climate change can be maximized and its costs and risks minimized by inclusion of several specific features. The system should target all fossil fuel-related CO2 emissions through an economy-wide cap on those emissions. The cap should be imposed ‘upstream,’ that is, on fossil fuels at the point of extraction, processing, or distribution, not at the point of combustion. The system should set a trajectory of caps over time that begin modestly and gradually become more stringent, establishing a long-run price signal to encourage investment in emission-reducing technology. It should adopt mechanisms to protect against cost uncertainty. And it should include linkages with the climate policy actions of other countries.”

Oct. 2007 - Robert N. Stavins, PhD

Pro

John Whitehead, PhD, Professor of Economics at Appalachian State University, stated in his Jan. 11, 2009 article “The Case for Cap-And-Trade (or a Carbon Tax) in 2009,” available at the Environmental Economics website:

“My feeling is that cap-and-trade legislation should be pursued in 2009, recession be darned. Benefit-cost analyses indicate that addressing climate change, at least in a small way and then ‘ramping up’ to something more significant over time, is a good idea.

The economic case for cap-and-trade (or a carbon tax) is clear. Climate change and the associated negative impacts of emissions are known in economics as negative externalities. Much theoretical and empirical research supports an environmental regulation that taxes the polluting activity (or, equivalently, capping the pollution with permits and allowing polluters to trade the permits). The additional production cost of taxes or permits causes profits to be lower in the polluting industries, the supply of the polluting product falls and price of the polluting good rises. As the price of polluting goods rise consumers use less of the polluting good. As the price of nonrenewable energy rises and the price of renewable energy falls (with technological improvement) we reach the Hotelling ‘switch point’ and the demand for renewable energy rises. The price of nonrenewable energy is, more or less, capped at the price of the renewable substitute and the world is a greener place.”

Jan. 11, 2009 - John Whitehead, PhD

CON (no)

Con

Jessica F. Green, PhD, Associate Professor of Political Science at the University of Toronto, in a Sep. 24, 2019, article, “It’s Time to Abandon Carbon Pricing,” available at jacobinmag.com, stated:

“Carbon pricing programs like cap and trade carry enormous political costs and few environmental benefits. We should abandon them — and instead pursue transformative climate policies that deliver immediate material gains to workers…

Cap and trade… [is] riddled with problems. In cap and trade, the government sets a ceiling, or a cap, on the total amount of emissions that can be pumped into the air. Companies purchase allowances and then trade with each other to meet their targets… Too many allowances can create a glut, driving down prices and generating “hot air,” a situation where compliance occurs on paper but fails to shrink emissions. Many cap-and-trade systems also permit carbon offsets, allowing market players to outsource carbon reduction to other places. In addition to being morally dubious, offsets have come under criticism for weakening carbon pricing schemes.

Finally, even these lackluster efforts to price carbon are undercut by subsidizing fossil fuels. A recent working paper from the International Monetary Fund (IMF) estimates that fossil fuel subsidies totaled $5.2 trillion in 2017 (though, admittedly, this depends on how subsidies are defined). These subsidies are directly at odds with carbon-pricing policies, since they reduce the cost of fossil fuels artificially…

Carbon pricing has poisoned the well of climate policy, with little in the way of emissions reductions. Once governments invest in infrastructure, housing, transportation, and adaptation, perhaps later they can use carbon pricing to speed things along. But for now, it’s time to move on.”

Sep. 24, 2019

Con

Nicolas Loris, Research Assistant at the Heritage Foundation’s Roe Institute for Economic Policy Studies, and Ben Lieberman, JD, Senior Policy Analyst at the Heritage Foundation’s Roe Institute for Economic Policy Studies, stated the following in their July 8, 2009 article “Cap and Trade Sold Under False Pretenses,” available at the Heritage Foundation’s website:

“Cap and trade is nothing more than a massive energy tax… Cap and trade will drive up energy costs for years to come, resulting in economic pain and higher unemployment.”

July 8, 2009 - Nicolas D. Loris Ben Lieberman, JD

Con

Myron Ebell, MSc, Director of Energy and Global Warming Policy at the Competitive Enterprise Institute, provided the following testimony on Apr. 22, 2009 at the US House Committee On Energy and Commerce Hearings on The American Clean Energy and Security Act of 2009, available at the Energy and Commerce Committee website:

“Cap-and-trade has been widely sold as a ‘market-based approach’ to reducing emissions. This is terribly misleading. Cap-and-trade subordinates markets to central planning. It takes the most important economic decisions out of the hands of private individuals acting in the market and puts them in the hands of government. The record of central planning in the twentieth century has not been judged a success, and most centrally-planned economies collapsed towards the end of the last century. Perhaps the advocates of cap-and-trade can find some glimmer of hope in the persistence of Cuba and North Korea, which are both models of economies that have commendably low, indeed negligible, greenhouse gas emissions…

[A] cap-and-trade regime would be the single largest government intervention in the economy and in people’s lives since the Second World War. That was the last time—and we hope it remains the last time—when people had to present ration coupons in order to buy gasoline (and many other products including cars, tires, sugar, coffee, meat, cheese, butter, and shoes). While the debate has focused on costs, far too little attention has been paid to the extent that political and economic freedoms would be lost or impinged upon under a cap-and-trade regime.”

Apr. 22, 2009 - Myron Ebell, MSc

Con

James E. Hansen, PhD, Adjunct Professor at the Columbia University Earth Institute, provided the following Feb. 25, 2009 testimony to the US House Committee on Ways and Means Hearing on Scientific Objectives for Climate Change Legislation, available at the Committee on Ways and Means website:

“‘Cap & Trade’ increases costs to the public as does ‘Tax & Dividend’, but without the dividend. Thus it should be termed ‘Tax & Trade’… parties support ‘Cap & Trade’ because they hope to profit – it is a give-away to special interests, who feel, based on extensive empirical evidence, that they will be able to manipulate the program through their lobbyists…

The worst thing about cap-and-trade, from a climate standpoint, is that it will surely be inadequate to achieve the sharp reduction of emissions that is needed. Thus cap-and-trade would practically guarantee disastrous climate change for our children and grandchildren…

The greatest injustice is to our own species – our children, grandchildren and the unborn, and people who live with nature, who we may call ‘undeveloped’, indigenous people who want only to live their lives without bearing burdens that we create…

Empirical evidence shows that Cap & Trade does not have a prayer of phasing out fossil fuel emissions fast enough to save the planet.”

Feb. 25, 2009 - James E. Hansen, PhD

Con

The Indigenous Environmental Network (IEN), stated the following in an article written by its Executive Director Tom Goldtooth titled “Carbon Trading, Carbon Offsets and RED/D’s: Reduction Emissions from Deforestation and Land Degredation,” available at its website (accessed Aug. 28, 2009):

“History has seen attempts to commodify land, food, labor, forests, water, genes and ideas. Carbon trading (emissions trading) and carbon offsets follow in the footsteps of this history and turn Mother Earth’s carbon-cycling capacity into property to be bought or sold in a national and global market. Through this process of creating a new commodity – carbon (CO2) – the Earth’s ability and capacity to support a climate conducive to life and human societies is now passing into the same corporate hands that are destroying the climate. Promoters of carbon trading and carbon offset regimes support capitalism as the solution to drive environmental change and innovation to address climate change…

The Indigenous Environmental Network (IEN) has consulted with indigenous spiritual people, from the North and South, about the proposals to put a price on air (carbon), to privatize the atmosphere (property rights of the air), and about a world that will have governments and corporations selling, bartering and trading carbon and other greenhouse gases. Once the idea of carbon trading and carbon offsets have been thoroughly explained (which has not been easy and rarely done adequately by pro-carbon trading/offset profiteers, brokers and political supporters), many Indigenous Peoples have said it is a ‘corruption of the sacred’. To participate in this carbon trading/offset schemes violates indigenous traditional knowledge and our Indigenous Original Instructions or spirituality (cosmovision) consciousness.”

Aug. 28, 2009 - Indigenous Environmental Network (IEN)

Con

Ralph Nader, LLB, former US Presidential Candidate and Founder of Public Citizen, and Toby Heaps, President and Editor of Corporate Knights magazine, stated the following in their Dec. 3, 2008 article “We Need a Global Carbon Tax,” published in the Wall Street Journal:

“If President Barack Obama wants to stop the descent toward dangerous global climate change, and avoid the trade anarchy that current approaches to this problem will invite, he should take Al Gore’s proposal for a carbon tax and make it global. A tax on CO2 emissions — not a cap-and-trade system — offers the best prospect of meaningfully engaging China and the U.S., while avoiding the prospect of unhinged environmental protectionism.

China emphatically opposes a hard emissions cap on its economy. Yet China must be part of any climate deal or within 25 years… its emissions of CO2 could amount to twice the combined emissions of the world’s richest nations, including the United States, Japan and members of the European Union…

Cap-and-traders assume, without much justification, that one country can put a price on carbon emissions while another doesn’t without affecting trade or investment decisions. This is a bad assumption…

[A]dministering billions of dollars of carbon credits in a cap-and-trade system in an already chaotic regulatory environment would invite a civil war between interest groups seeking billions in carbon credit handouts and the regulator holding the kitty. By contrast, a uniform tax on CO2 emissions levied at a small number of large sites would be relatively clear-cut.”

Dec. 3, 2008 - Ralph Nader, LLB Toby Heaps

Con

The Institute for Energy Research (IER) stated in its Mar. 12, 2009 article “Cap and Trade Primer: Eight Reasons Why Cap and Trade Harms the Economy and Reduces Jobs,” available at its website:

“Reasons why Cap and Trade is a Bad Idea:

Cap and trade is designed to increase the price of 85 percent of the energy we use in the United States. That is the point. For it to ‘work,’ cap and trade needs to increase the price of oil, coal, and natural gas to force consumers to use more expensive forms of energy…

Cap and trade schemes for carbon dioxide have not worked to reduce emissions. Europe’s Emissions Trading Scheme (ETS) began in 2005. The first phase, from 2005 to 2007, did not reduce carbon dioxide emissions. Instead, overall emissions increased 1.9 percent over that period…

Cap and trade will assess a heavy penalty on Canadian oil. Much of the oil we get comes from its vast reserves of oil sands. Because it requires more energy to extract the resources from those sands than it does to produce oil in the Middle East, cap and trade will make Canadian oil more expensive than oil from the Middle East.

Cap and trade, therefore, creates incentives to import more oil from the Middle East, not less. Cap and trade also penalizes domestic oil extraction from oil shale.”

Mar. 12, 2009 - Institute for Energy Research