Taxation or Cap-and-Trade

Both the cap-and-tmde and the carbon tax approaches have advantages and disadvantages  

If allocations were set by industry, such as a uniform cap for the whole power industry (which represents some 40% of the American carbon emission), it would probably double the cost of electricity in locations where electricity is made from coal while representing a windfall for the nuclear power industry. If caps were set as a function of carbon emission, it is not clear how indirect emissions would be handled. For example, the oil and refinery industry is directly responsible for only 4% of the total carbon emission, but it fuels a transportation industry, which is responsible for 35%. 

If the carbon price on the global carbon market settles at 41 per ton/ the value of the global carbon credits market would be over 200 billion, which is more than that of most commodities. It is argued that this trading will drive jobs to countries that do not limit carbon. The more industrialized nations emit more carbon and therefore the cap-and-trade approach would penalize them more. It is for this reason that the opponents of this approach call it economic disarmament. The EPA in the United States estimated that a 2008 bill on cap-and-trade would have reduced the nation s GDP by about 2%. 

Instead of waiting for market forces to take effect, large-scale public funding should be provided for renewable energy development and demonstration 

Post-Oil Energy Technology After the Age of Fossil Fuels 

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