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Saturday, September 26, 2009

A Curious Post by Delong

Delong posts a Bush-era finding on the benefits of cap and trade. Part of it compares cap and trade to 'emissions fees' (tax) - and finds, for some of the same reasons I've mentioned on this blog, that a tax has certain downsides compared to cap and trade.

See this (bold is something I've discussed before):
"As mentioned previously, one problem with emission fees is that it is difficult to know beforehand at what level to set the fee to achieve the desired pollution reduction. This might require periodic adjustments of the fee level, and such adjustments would introduce uncertainty that could interfere with firms' planning decisions. The emissions fee does, however, allow the government to set with certainty the marginal cost of emissions reduction. For each emission fee there is a corresponding allocation of permits that would achieve the same results; however, it is difficult to know beforehand what the market price for permits will be once trading actually takes place."

The reason the post is curious is that it was released by Bush economists lead by Greg Mankiw, who everyone knows know has the complete opposite position (favors taxes over cap and trade).

5 comments:

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