A fair point, but remember that this is still a cap-based system. It says that there is an absolute limit on carbon supply -- basically saying that we *will* pump X amount into the atmosphere. The question is simply how much, and who gets to "buy" that carbon now that there's no longer a nigh-infinite supply available.
In practical economic terms, if the cap is set to a meaningful level, it will cause prices to rise. (Rise dramatically if the cap is tight.) Carbon consumption will become more expensive, which doesn't affect the rich too much but will affect the poor quite a lot. (This is why carbon taxes are traditionally unpopular -- like most sales taxes, it's fundamentally regressive.) By redistributing the proceeds of the auctions, the poor get more of a shot at some of that carbon (as you point out), but due to the price they will have incentives to seek out lower-carbon options.
In theory, that should tend to drive a virtuous cycle: it's a good spur to innovation to reduce carbon usage. Granted, theory and practice don't always line up, but the economics seem basically sound. By putting a consistent price on carbon, this forces consumers to think about that cost more concretely. And it provides a straightforward regulatory framework for gradually reducing the supply (and therefore the atmospheric effects) over the next few decades...
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Date: 2010-02-11 10:28 pm (UTC)In practical economic terms, if the cap is set to a meaningful level, it will cause prices to rise. (Rise dramatically if the cap is tight.) Carbon consumption will become more expensive, which doesn't affect the rich too much but will affect the poor quite a lot. (This is why carbon taxes are traditionally unpopular -- like most sales taxes, it's fundamentally regressive.) By redistributing the proceeds of the auctions, the poor get more of a shot at some of that carbon (as you point out), but due to the price they will have incentives to seek out lower-carbon options.
In theory, that should tend to drive a virtuous cycle: it's a good spur to innovation to reduce carbon usage. Granted, theory and practice don't always line up, but the economics seem basically sound. By putting a consistent price on carbon, this forces consumers to think about that cost more concretely. And it provides a straightforward regulatory framework for gradually reducing the supply (and therefore the atmospheric effects) over the next few decades...