The Carbon Tax Debate...Continued

From ES&T
What would happen if policy makers in the U.S. suddenly approved a tax on CO2? Would electric utilities instantaneously switch to more efficient power plants with lower CO2 emissions? Would consumers immediately become more careful of their electricity use?

According to the article in Environmental Science and Technology (ES&T), the answer is "YES".

A tax on CO2 emissions as low as $35 per metric ton (t) would lead to a 10% reduction in CO2 from facilities located in the Northeast and Midwest, whereas the same price would result in reductions one-third as large in Texas.

The study indicated that a carbon tax would indeed lower consumer demand for electricity, implying that consumers would begin to invest in more energy efficient appliances and reduce energy use. Other studies suggested that a carbon tax would effectively lead energy companies to invest in low-carbon technologies.

A couple blogs ago, we were debating the idea of a gas tax vs. a carbon tax vs. a cap and trade system. You may recall that the political feasibility of a carbon tax was questioned. Co-author of this study, Granger Morgan, agrees that the introduction of carbon tax is not likely. "I don't think anybody would actually instantaneously switch on a high carbon price. It will probably be phased in or done through a cap-and-trade system, and that is how it should be," he asserts.

Recall that Sharlissa recommended this article describing the different implications of a carbon tax and cap and trade system. The author advocates a cap and trade system but warns about the danger of creating a secondary carbon market in which carbon traders have a stake in not completely eliminating carbon emissions.

Do you agree that America's first step to addressing climate change should be a cap and trade system? Under a cap and trade system, do you think a secondary carbon market could be avoided, or do you think the US would fall prey to the same problems seen in Europe?