First, I want to make it clear that we support mandatory,
economy-wide controls on greenhouse gases. These include certain cap-and-trade programs and a carbon fee. However, after a lot of research and analysis, we believe that a mandatory, economy-wide and escalating carbon fee is the best approach for addressing global warming.
There are several reasons why we prefer a carbon fee. First, it is simple. We propose a modest initial fee imposed on every ton of CO 2 ($10) that would escalate $2 per year in real terms. The fee would be imposed upstream when carbon enters the economy, at roughly 2,000 sources, making it very easy to administer.
Unlike cap-and-trade, there is no need for a long and complex rulebook for trading, nor is there a need for numerous governmental agencies to administer it. One look at the proposed Lieberman-Warner bill will show you how complex cap-and-trade really is and the large number of agencies required to manage it. The simplicity of a fee also offers the benefit of rapid implementation. A fee could be implemented years ahead of cap-and-trade.
The second benefit of a fee is its transparency. Everyone will know the costs and the impact on our economy and on each participant.
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Many of the proponents of cap-and-trade want to avoid discussing the costs and impacts. This is because the costs in their proposals are unacceptably high and U.S. consumers would not stand for it if they knew the costs, or because certain groups (usually large emitters) would obtain enormous quantities of free allowances worth billions of dollars. As Rep. Dingell says when referring to cap-and-trade, “It’s a hidden tax, which is precisely why so many politicians like it. I haven’t found many [environmentalists or economists] saying cap-and-trade works. But that approach happens to be politically easiest because people can say the program isn’t a tax, which is a bare-faced lie, as you know.”
We need to face the fact that there is a cost to transitioning away from carbon and somebody will have to pay for it. This cost is hidden under many of the cap-and-trade proposals, while it is fully transparent under a fee.
Similarly, a carbon fee provides cost certainty for the long-cycle, large capital investments our industry must make to provide clean, reliable energy. Economic research suggests this cost certainty will lead to more investment in carbon reduction technologies than a similarly configured cap-and-trade program with volatile carbon prices.
We believe a carbon fee is also fairer. Everybody pays the same
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