Carbon tax or cap-and-trade? The debate we never had « BraveNewClim
| Aspect | Cap and trade | Carbon tax | Winner |
| Cost on business and community | For a given price on emissions the cost on carbon is has no influence for change in the broader economy (beyond businesses covered by the scheme), other than to become more efficient. | The cost on emissions has a wider impact than just the covered emitters as the tax drives the broader community and smaller businesses to seek alternative low emission electricity, products and services that can reduce National emissions | Tax |
| Economy wide and community wide involvement | Destroys the ability for an individual or business entity from reducing economy wide impacts.
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Drives action directly through emitters and in secondary voluntary markets as people use their choices to avoid the cost and contribute to national emissions reduction | Tax |
| Simplicity and bureaucracy cost | Terrible, complex documents, complex schemes, complex shifting of funds and compensation for little value, legal risks | Minimal
Can be managed to charge only what is required to cause change, letting the market decide where the change would occur without the merry go round. |
Tax |
| Encouraging innovation in the market | Rules out many offset products and as proposed, destroys the integrity of voluntary purchases of renewable energy | Drives innovation and a full suite of low emissions solutions and renewable energy solutions that can be led by market choice for genuine renewable energy | Tax |
| Need for non tangible offset frameworks. | Creates perverse outcomes and the need for intangible concepts such as using permits as carbon offsets which do not directly link to low emissions solutions and may not indirectly drive low emission solutions and may not even cause economy wide reductions. | No need for weird reverse logic intangible offset concepts using permits to pollute as tangible market offset products and renewable energy choices would work to lower economy wide emissions. | Tax |
| Price certainty | Requires massive free permit allocations to indirectly manage the permit price. Falls back on a carbon tax to ensure the price stays below $40 even with many emitters paying nothing like this when grandfathered permits are factored in | Easily assigned and controlled by Government.
Easily adjusted with new science and negotiations at regular intervals at markets transition. |
Tax |
| Need for full information | Requires complex assessment of current emissions and forecasting of future emissions in five year blocks to seek to minimise over-allocation that would constrain progress or under-allocation that would cause mechanism failure and the need for review and intervention | Not required as the price becomes a constant driver in the economy throughout economic cycles | Tax |
| Certainty in achieving the greenhouse reduction objective | Unclear as to whether the CPRS could achieve certainty due to its compromises, measurement methodologies and the ability for Government to issue unlimited permits in a given year | Reduces emissions without direct control and necessarily requires reviews as the economy transitions to lower emissions and updates with science and negotiation. | Neither approach provides absolute certainty |
| Creating a difference between pollution costs and abatement for customers to decide on what products and services they would buy. | Buying and surrendering CPRS permits to reduce emissions causes Siamese twinning, locking the cost of abatement with the cost of pollution. (ultimately all other offsets form national and international sources would cease where all nations adopt cap and trade) |
Increases the cost of polluting technologies and provides a relative benefit for other technologies to compete more fairly, letting the market decide what type of electricity, offsets and efficiencies they buy, knowing that these will reduce National emissions | Tax |
| International linking | Reduces options for trading offsets and low emission products | Increases opportunities to trade in offsets and low emission product |
ate.
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