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hw6 - PADP 8670 Fertig Homework 6 Due November 7 2011 Fall...

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PADP 8670 Fall 2011 Fertig UGA Homework 6 Due November 7, 2011 Even in the absence of global warming, some economists and policy analysts have been arguing for a cap-­‐and-­‐trade system for limiting CO 2 emissions in the United States and worldwide. Other economists are arguing for Pigouvian taxes to internalize the pollution externality. Read the attached article and write a 1 page discussion of the differences and similarities between the two programs.
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11/2/10 1:15 PM Yale Environment 360: Putting a Price on Carbon:<br /> An Emissions Cap or a Tax? Page 1 of 6 http://e360.yale.edu/content/print.msp?id=2148 OPINION Putting a Price on Carbon: An Emissions Cap or a Tax? The days of freely dumping greenhouse gases into the atmosphere are coming to an end, but how best to price carbon emissions remains in dispute. As the U.S. Congress debates the issue, Yale Environment 360 asked eight experts to discuss the merits of a cap-and-trade system versus a carbon tax. A broad spectrum of people concerned about global warming and U.S. energy independence agree on one basic truth: Sooner or later, emitting planet-warming greenhouse gases is no longer going to be free. Whether it comes this year, or next, or in five years’ time, legislation imposing a price on burning fossil fuels seems all but inevitable. Any law that places a price on carbon must achieve two basic and interrelated goals: discouraging — with increasingly painful economic consequences — the use of oil, coal, and natural gas, and encouraging the development of renewable sources of energy. Two paths to this end have been proposed. The first is a cap-and-trade system, which would place progressively stricter limits on fossil fuel use; require power plants, industries, and other major sources of greenhouse gases, to purchase permits to discharge carbon dioxide; and establish a market in those permits. The second is an outright tax on fossil fuels. Proponents of both methods say the economic hardship created by higher energy prices could be offset by rebates to taxpayers. The cap-and-trade option has attracted far more attention and has many more supporters, including President Obama, key Congressional leaders, and an influential coalition of environmental groups and big businesses, including General Electric, Dow Chemical, Shell Oil, and Duke Energy. Congressional leaders say they hope to pass a cap-and-trade bill by year’s end, but whether they can achieve that goal remains a major question. Supporters of cap-and-trade argue that it has two main strengths. It sets a steadily declining ceiling on carbon emissions, and, by creating a market that rewards companies for slashing CO2 (corporations that reduce emissions below their allotment can sell them on the open market), it uses the free enterprise system to wean the country off fossil fuels and onto renewable energy. Proponents of a carbon tax say their plan has one overriding benefit: Its simplicity. They contend
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