Cap and Trade. Good, bad or ugly?

[alfred russel]

so even if there are modest unilateral reductions in the US level of consumption that aren't offset by increases elsewhere

that's something you could technically offset by taxing the entire CO2 (there's other foul gasses too but lets just use this for ease) cycle throughout production.
Suddenly that stupid toy made in China or India wouldn't be so cheap anymore, something which would (theoretically) result in:
either the people not buying the imported goods anymore because they're too expensive, which might then lead to the return of some jobs to places closer by.
either the people continue to buy the now more expensive goods, knowing that they're paying added tax for their polluting ways.

Problem is that it's pretty damn nasty to calculate the amount of pollutants created along the entire process of any good.

You can use border adjustments to try to prevent substitution in imports (and we are attempting to do that). But that is only a small amount of the substitution that takes place (even in China, exports to the US are a relatively minor portion of their GDP). For example, when the price of oil went up, Americans drove less miles. Presumably if the US reduces its demand, prices will fall allowing other countries to increase their consumption.

[crazy canuck]

My crackpot, paper-thin theory which took me three seconds to dream up cannot possibly be wrong. 

The rest of it sounded pretty accurate.

[Caliga]

The rest of it sounded pretty accurate.

66% is at least passing (in some schools).

[grumbler]

Problem is that it's pretty damn nasty impossible to calculate the amount of pollutants created along the entire process of any good.

Fixed.  That's the problem with a "carbon tax."  You have no way of measuring what you are taxing, and the companies and governments in foreign countries have no incentive (and plenty of disincentive) to cooperate with your tax scheme.

[grumbler]

Its the cost of such a clearing house that is the problem.  It would not be able to rely on market forces to self regulate.

Nopt "market forces," but self interest, would mitigate against counterfeiting.  Anyone who buys bogus permits (of this, or any other type) is risking the loss of their entire investment if caught.

[grumbler]

You can use border adjustments to try to prevent substitution in imports (and we are attempting to do that). But that is only a small amount of the substitution that takes place (even in China, exports to the US are a relatively minor portion of their GDP). For example, when the price of oil went up, Americans drove less miles. Presumably if the US reduces its demand, prices will fall allowing other countries to increase their consumption.

It is the same problem in a way, as mandating milage standards for automobiles.  Presumably, higher milage reduces demand and lowers price, but that just makes it cheaper for people in other places to drive even more miles in highly-polluting cars.

[crazy canuck]

Nopt "market forces," but self interest, would mitigate against counterfeiting.  Anyone who buys bogus permits (of this, or any other type) is risking the loss of their entire investment if caught.

What investment?  They are trading for the right to pollute.  What is the government going to say if the credits they bought turn out to be fraudulent - ask them to take the carbon out of the air?  There is absolutely no incentive for a company to do due diligence past not being accused of being a party to such a fraud.

[Caliga]

I say we bring back the Stanley Steamer.

[alfred russel]

It is the same problem in a way, as mandating milage standards for automobiles.  Presumably, higher milage reduces demand and lowers price, but that just makes it cheaper for people in other places to drive even more miles in highly-polluting cars.

Yes, although historically the mileage standards have been about energy independence and localized pollution (not CO2). So while high mileage standards in the US may contribute to the pollution nightmare that is Mexico City, they are still successful from the US perspective. But if the goal is to reduce CO2 emissions globally, then the offshoring of CO2 generation is not only pointless, but possibly counterproductive (as other countries become more dependant on cheap fossil fuels, they will presumably be less willing to agree to deals limiting their use).

[grumbler]

What investment? 

The money they invest in buying permits.

They are trading for the right to pollute.  What is the government going to say if the credits they bought turn out to be fraudulent - ask them to take the carbon out of the air? 

I don't understand this question.  It is like any other permit.  If you commit an act that is illegal without a permit, you get fined and/or charged with a crime.  At least in the US.  In Canada, if you fish with a fraudulent fising license, is the government going to ask you to brig the fish back to life? 

There is absolutely no incentive for a company to do due diligence past not being accused of being a party to such a fraud.

Given that they will suffer whatever penalty a company that doesn't buy permits at all would suffer, I suppose you are right.  All permit-based rationing suffers from the potential problem of fraud.  So does taxation (as you yourself noted).

[grumbler]

Yes, although historically the mileage standards have been about energy independence and localized pollution (not CO2).

Historically, this is true.  It is not true of the debate over the recently-passed new US milage standards, though.

[alfred russel]

Fixed.  That's the problem with a "carbon tax."  You have no way of measuring what you are taxing, and the companies and governments in foreign countries have no incentive (and plenty of disincentive) to cooperate with your tax scheme.

I don't know if you are differentiating the carbon tax from the cap and trade plan, but they both run into the same problem in this regard.

[crazy canuck]

The money they invest in buying permits.

No, they are buying a credit from someone who is representing to them that they have carbon offsets to sell.  This is fundamentally different then a permit scheme where the permit is obtained directly from the government.  In the former case there is no incentive on the seller of the credit to not be fraudulent other then the risk of being caught.  In the latter case we can rely on the bona fides of the government issuing the permit.

[Crazy_Ivan80]

Problem is that it's pretty damn nasty impossible to calculate the amount of pollutants created along the entire process of any good.

Fixed.  That's the problem with a "carbon tax."  You have no way of measuring what you are taxing, and the companies and governments in foreign countries have no incentive (and plenty of disincentive) to cooperate with your tax scheme.

it has been done for a few products, butn it's not 100%.
And foreign governments don't need tocooperate, the taxation is done at your borders when the goods cross them.
basically you tax the miles travelled of the finished product, the energy used producing it, the miles travelled of the resources needed to produce the good, the energy needed to refine the resources, the miles travelled... well, you get the point.
this from the assumption that people will still want to buy similar goods meaning that producing them closer to the region where they'll be sold is an incentive (as are using less polluting methods)...
The tax basically has the consumer pay for the pollution he "outsources".
Not a big fan of it myself, but I can see where it could be useful in order to cut down on such frivolities as catching shrimp where I live, flying it over to Morocco to have it peeled and then fly it back here for selling.

[crazy canuck]

The tax basically has the consumer pay for the pollution he "outsources".
Not a big fan of it myself, but I can see where it could be useful in order to cut down on such frivolities as catching shrimp where I live, flying it over to Morocco to have it peeled and then fly it back here for selling.

Food is likely the thing that would be impacted the most - Fresh fruit and vegetables when not in season locally would become expensive.