• I have seen a lot of pushback about German CDU comments regarding carbon taxes in this piece from Handelsblatt. In short, the party favors broader cap-and-trade schemes over CO2 pricing. Their reasoning? It is simpler for scientists to determine the amount of carbon that should be emitted in a given period. Then, regulators can allow this amount to be traded and the market can then set the price. However, calculating demand curves for fossil fuels upfront and determining the corresponding price is unlikely to yield optimal results. To me, this is logical. Even assuming lawmakers could set the price perfectly (not likely), the two approaches would lead to the same emissions. So, why not just skip the complicated pricing step and ensure the correct amount of emissions, with no wiggle room? Furthermore, CO2 prices are always in nominal terms. This means they are vulnerable to inflation and regular price adjustments are necessary. I have yet to understand the controversy on this particular issue (setting German politics aside). Above all, why do some feel so strongly that carbon taxes are superior to emissions trading?
  • Speaking of which, Oregon is close to passing a cap-and-trade scheme similar to California’s: