Newsweek International editor, Fareed Zakaria argues that carbon taxes beat carbon markets as a way to control greenhouse gas emissions and spur technological innovation. He notes that the during the time the Kyoto Protocol was being implemented, 800 coal-fired power plants were built around the world. They emit 5-times more carbon than the Kyoto Protocol cuts. So why a carbon tax?
First, on the front page, the Washington Post details the shenanigans taking place in the European Union's carbon markets (reported here and here in Reason) in which various countries cheat in order to favor their home industries.
Given these problems, Zakaria argues:
Once you tax carbon, you make it cheaper to produce clean energy. If burning coal and petrol in current ways becomes more expensive because of the damage they do to the environment, people will find ways to get energy out of alternative fuels or methods. Along the way, industrial societies will earn tax revenues that they can use, in part, to subsidize clean energy for the developing world. It is the only way to solve the problem at a global level, which is the only level at which the solution is meaningful...
A carbon tax would also send the market a clear and powerful signal to develop alternative energies. Daniel Esty, a Yale environmental expert whose new book, "Green to Gold," is a blueprint for new thinking about the environment, argues that the only way forward is a "transformational approach that creates incentives for innovation and alternative energy. The way we think about these issues is old-fashioned. We're still trying to limit, regulate, control and inspect. We need to become much more market-friendly. Put in place a few simple rules, and let the market come up with hundreds of solutions. We're not even 10 percent of the way down such a path."
In the end, everyone realizes that innovation is the only real solution to the global-warming problem.
Whole Zakaria column here.
Just a heads up--I have done a lot of reporting and just completed an article for The American on carbon markets versus carbon taxes. As a generally market-friendly guy, I've nevertheless concluded that carbon taxes are the way to go. I will link to the article when it appears this summer.