Politics & Economics: Climate Change's Great Divide; Lawmakers Favor Carbon Caps, Trading; Economists Prefer a Tax
The biggest political battle in Washington over climate change may not pit Democrats against Republicans. Instead, it could be economists versus politicians.</br></br>Many academics, even conservatives, favor a tax on carbon emissions. Many lawmakers, including some liberals, fear a political backlash against new fees. They lean toward a cap-and-trade system, which would set a limit on carbon-dioxide emissions and require companies to obtain permits to release carbon dioxide into the air.</br></br>There may not be much practical difference between the two approaches. Caps would likely function much like a tax, levying new costs on business that would ultimately be passed on to consumers.</br></br>Still, both sides say important principles are at stake. A cap-and- trade system, say its critics, could reward big polluters if it bases its allotment of permits on how much industries emit now. It also could spark a lobbying frenzy as industries fight to turn the system to their advantage. Defenders of cap and trade say it will provide a better incentive to cut emissions because companies can sell excess permits. They call a tax heavy-handed.</br></br>"The concern about taxes is understandable because people think you're going to raise their electricity bill by putting a tax on coal," says Kenneth Green, a resident scholar at the conservative American Enterprise Institute who advocates a carbon tax. "But with cap and trade you're still going to raise the cost of their electricity."