Articles by Clark Williams-Derry

A carbon tax isn’t the only solution

At least someone gets it:

All three of the leading Democratic candidates have proposed cap-and-trade plans that auction 100% of their CO2 permits. This is, economically speaking, the same thing as a carbon tax.

The context: New York Times columnist Tom Friedman is complaining that no major presidential candidate has proposed a carbon tax -- which he takes as evidence that nobody has had the guts to take a stand in favor of policies that would "trigger a truly transformational shift in America away from fossil fuels."

But as uber-blogger Kevin Drum points out, this is simply rubbish.

High gas prices make hybrids look even better

A couple of years ago, I ran some numbers trying to figure out which was the better buy for the planet -- a biodiesel Jetta or a hybrid Prius. And I came to the tentative, but perhaps counterintuitive, conclusion that the best buy was ... wait for it ... a Toyota Corolla.

The Corolla, you see, was thousands of dollars cheaper than the Prius (the runner-up), even after I accounted for all the savings on gas from driving a fuel-miser. And if you were a green-minded consumer -- someone whose top priority was reducing climate-warming emissions, say -- you could probably put those thousands to better use somewhere else. Depending on the circumstances, I figured that lots of other investments -- power-sipping appliances, say, or a furnace upgrade, or home insulation, or even donations to a worthy cause -- might all count as "better buys" than a brand-new Prius.

But with recent gas-price spikes, I wondered if my earlier calculations were still holding true. And I've got to admit it: if you're in the market for a new car, a Prius is looking better and better all the time.

Why cap-and-trade is preferable to a carbon tax

The Washington Post ran an interesting op-ed in its Think Tank Town section last week, arguing for a carbon tax. The nut graph:

The only effective way to begin reducing greenhouse gas emissions and slow global climate change is to make it more expensive to emit carbon dioxide. Unless businesses and consumers pay a price for carbon dioxide, neither will make the investments in technology and changes in energy use needed to dramatically reduce emissions.

Rock on, Think Tankers. But that's just the start of the goodness. The authors -- two researchers from RAND Corporation -- also put forth a nifty idea about how to cushion the economic impacts of new taxes:

How to structure a cap-and-trade program

From an awesomely meaty article on cap-and-trade from The San Francisco Chronicle comes this pearl of wisdom (in bold at the bottom of the quote):

[T]he lesson of the acid rain program is to keep the plan simple and easy for all parties to understand.

"If it starts to employ a lot of special provisions to take care of every party's special needs ... and if it starts to look like the Chicago phone book, then throw it out," [RFF economist Dallas Burtraw] said. "A poorly designed market is worse than no market at all."

I'm not sure I'd go quite that far -- a carbon market's a pretty important thing, and I'd be willing to live with a less-than-perfect system if it's the only one that's politically feasible.

That said, amen to the virtues of simplicity! Obviously, when designing a cap-and-trade program, there will be all sorts of pressure to create special interest loopholes, or dole out goodies to favored constituencies. Over the short-term, that might seem like smart politics -- but over the long-term, the political drawbacks of a clunky, unworkable program will far exceed any short-term benefits.