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Originally Posted by Slava
Sure and that sounds good...except that its basically the false economy I was referring to. Then you have people trading credits for whatever price they can sell them for and it makes it really hard for say a multi-billion dollar operation to plan that their carbon costs in three years should be $X.
The other issue is that Cap and Trade hasn't really worked in Europe at all. I've seen that comment from both the environmental groups as well as from business.
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Cap and trade favours existing industries and large corporations, and penalizes growth since a new company just starting out wouldn't have a carbon allotment. A large corporation whose business area is in decline could sell credits to prop themselves up. In some respects it reminds me of equalization payments - there's almost an incentive for bad corporate management. But it's the existing industries and corporations that have the resources to lobby the government.
I remember reading a pretty good article a couple of years ago by an economist about why a carbon tax would be both more effective and fairer than a cap and trade program, but unfortunately can't remember where I saw it. I'd support a properly implemented, revenue-neutral carbon tax. Unfortunately there seems to be a bit of a stigma associated with the whole idea. It's also almost impossible to implement something without the US also doing it.