The energy bill just passed by the House of Representatives and awaiting action in the Senate is extremely long and complex, and cap and trade is only one part of it; but like Becker I will confine my remarks to that part, and thus treat the cap and trade component as if it were a separate bill. I will also assume that it will be enacted, and in much its present form.
Becker's analysis of the political realities surrounding the bill are persuasive; and he probably is also right that revenues generated by a tax (in lieu of a quota) approach to carbon emissions would be dissipated on other government programs, such as health-care reform, rather than used to pay off some of the nation's mounting public debt. Moreover, imposing heavy new taxes in the midst of a depression would retard economic recovery.
In principle, a stiff tax on carbon emissions (and other greenhouse gases, but for the moment I'll confine myself to carbon) is, it seems to me, superior to the quota (cap and trade) approach. (I develop this argument in my book Catastrophe: Risk and Response [2004].)
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