Home » Uncategorized » Throwing Revenue Away: Cap & Trade’s Hidden Transaction Costs

Throwing Revenue Away: Cap & Trade’s Hidden Transaction Costs

Different carbon prices can look the same! I have just stumbled on a surprisiing fact about cap and trade systems.

Cap and trade inevitably impose costs on producers and government, as well as paying traders (and persumably giving profits to some traders). These are all real social costs that can be almost completely avoided with a simple carbon tax (call it a FEE to be politically correct).

These extra costs can’t be avoided – that means that a permit actually costs the business more than the “carbon price established in the market.” (So much for the argument that carbon markets provide good information about the true cost of abatement.) Research shows these costs are substantial. And there are costs for the govenrment as well.

There are two resuts from recognizing all the transaction costs of cap and trade. The first is that for any given carbon price under cap and trade businesses are actually paying quite a lot more. The real price under cap and trade is higher than it looks. You couid have a higher carbon tax and hurt businesse less!!

The second is that the net revenue available to government at any market price is smaller with cap and trade than with carbon tax. Cap and trade throws government revenue away!! Waste,Waste WASTE!!!

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