CBO: carbon tax: greater emission reductions at much smaller cost

Imagine the cover as blue, not red. The I-MAC version of Adobe Photoshop is having problems.

A study released February 13 by the Congressional Budget Office seems to argue against the Warner-Lieberman bill. In a blog post announcing the study's publication, the CBO's director wrote:

A tax could achieve a long-term emission reduction target at a much smaller economic cost than an inflexible cap.
He explained,
  • The advantage of a tax stems from the long-term nature of climate change (which depends on the build-up of emissions over many decades, but is not sensitive to the amount of emissions in any given year) and the uncertain and variable nature of the cost of reducing emissions (which will vary from year to year based on the weather, conditions in energy markets, and the availability of new technologies).
  • An inflexible cap-and-trade program would provide more certainty about annual emissions than would a tax; however, that certainty would come at a cost: The cap would require too many reductions when the cost of achieving them was high and would mandate too few reductions when the cost was low.
  • Flexible cap-and-trade programs could achieve some, but not all, of the efficiency-improving/cost-minimizing advantages of a tax.