What do you think about a Cap and Trade system?

Question

What do you think about cap and trade environmental system? Do you feel its effective or do you feel it will only increase costs on consumers? Or do you believe it will work, limit costs, and reduce pollution? I'd like to hear what your thoughts on it are.

Answer 1

Permits have a fundamental flaw in them, they basically allow you to pay for polluting.  But, this is a problem because pollution, being a negatively externality, already gets produced too much.  Any production of a negative externality is too much.  But, all in all it is better than the usually preferable lassiez faire approach because it MIGHT cause less pollution and would for sure not produce more.

Answer 2

Any system that has companies pay for the right to pollute will pass costs on to consumers.  That's the only way to reduce the quantity demanded to a sustainable level.  I think it could work, if it's implemented correctly.  By that I mean that the number of permits must actually lower the level of pollution, and we can't allow the companies to lobby to have the number of permits so high that they don't have to change their output decisions.  Also, the government should auction rather than give away permits, because if they give them away, producers would collect the quota rent in the form of higher prices (which they will charge because their output is limited).  

I'm stuck between whether I prefer cap-and-trade or a tax.  A tax has the advantage of being simpler and more transparent, but c&t allows the quantity to be set directly.  Another interesting aspect of c&t is that it allows environmental groups who believe the quantity is too high to buy up permits, essentially taking them off the market.

Answer 3

Another tax system that will do nothing but milk the people and make the rich richer . Example Al Gore started a carbon credit trading company it is worth 300 million with the potential to be worth 1 billion dollars . Now that news Huh ?