Mar 222009

Alex Harrowell at A Fistful of Euros provided me with some new examples of why cap-and-trade systems are a really bad idea. I’m not sure he’s against cap-and-trade like I am, but he makes the point that a carbon tax is a lot simpler to enforce, and a lot less prone to political influence trading. For one thing, with a carbon tax there are a lot fewer entities to keep track of:

Further, how many SKUs (Stock-Keeping Units – individual products) does the Chinese export sector produce? It’s got to be in the tens of thousands at the least. Under this proposal, each one would have to be carbon-audited accurately and regularly and assessed for taxation on that basis. It is far from clear whether the importing state or the exporting state would do this. Just taxing fossil fuel, already, involves less than a dozen SKUs, which happen to be bulky, smelly, heavy, or black and dusty, and therefore difficult to hide on a big scale.

Of course, the governments of the world have little motivation to institute a simpler, easier-enforced scheme that would deal with the problem of carbon emissions directly.

If tens of thousands of carbon-emitting products need to be audited and assessed, that will create lots of jobs for government employees, which directly or indirectly will create lots of rewards that can be offered to political supporters. And it would provide lots of reasons for lobbyists to come, hat in hand, to the governing officials to make sure their products are treated well in the process.

If global warming was really an important issue, we’d go with the carbon tax instead. But unfortunately, there are very few people out there who think it’s more important than an oportunity to expand governmental power.

[spelling correction, 24-Mar]