Becker/Posner has a great new blog post about the problems with cap and trade carbon offset systems. The reason I point this out over the zillion other econ people jumping on the carbon-gabbing bandwagon (myself included) is because the entire post talks about 3 negatives of carbon offsetting via voluntary cap-and-trade - and the negatives are ENTIRELY psychological.
From their blog (in red):
1 The first is that it creates the impression that modest reductions in the rate of annual increases in carbon emissions make a meaningful contribution to the fight against global warming.
2. Second, the movement encourages the belief that anyone who reduces his carbon "footprint" (that is, the emissions of carbon dioxide that he causes) to zero has done his bit to combat global warming.
3. Third, and most serious, the carbon-offset movement, combined with well-publicized projects by Google and other companies to reduce carbon emissions, creates the false impression that global warming can be tamed by voluntary efforts, just as cleaning up after dogs has been achieved by voluntary efforts, without need for legal compulsion.
...all psychological arguments against cap and trade. I wonder, if we think about carbon taxes as an alternative, do these same negatives dissapear? I would argue the first two don't. The truth is, the higher the tax, the less feasible it will be. Even if one assumes a tax passes government muster, there is only so much offset a tax increase can do. Trying to do more (ie beyond what is feasible) would incite riots and protests, of this I am sure. Second, inherant in the first two arguments is the idea that people THINK they know or THINK they can guesstimate accurately how much of a carbon footprint they leave. This is offbase to say the least, as Posner points out. If one person can't get it right, what makes us think our government can?
Nevertheless, the third argument is clearly a net postive for the tax-lover crowd. A tax is not voluntary, it's mandatory. It has some teeth. The problem is, as I mentioned, if the government were to impose too high of a tax, that could create its own problems in the form of civil unrest, or if the "efficient" tax is miscalculated (and it would be), it could also do more harm than good.....