> I'm not entirely sure what you mean by a "conventional cap and trade" [+ > fixed prices guaranteed by government]
Something like: > They have built off the seminal work of > Roberts and Spence (1976), who first proposed a "mixed system" of > emission permits bounded by a penalty for excess emissions and a > subsidy should the permit price fall below a certain threshold. However with a single price, ie the government would offer to buy and sell unlimited amounts of permits at a fixed price. This would ensure zero short term price volatility. To ensure revenue neutrality, taxes and grandfathering would have to be adjusted each year. I had a discussion with Geoffrey Styles on cap and trade. He basically argues that the "cost" of a system is what industry collectively pays, and that therefore cap and trade with grandfathering gives far greater reductions for a given cost to industry than carbon taxes. http://energyoutlook.blogspot.com/search/label/cap-and-trade This is about political feasibility, because any change that really hurts a small group of incumbents, while providing a new benefit to many, will get massive opposition from the incumbents and lukewarm support from those due to benefit. But it's also about export competitiveness, because the right type of grandfathering allows special treatment for export intensive business. I understand these concerns, and wonder what mechanisms there are to limit the damage from price volatility inherent in targeting quantity rather than price. Is there any benefit in having any short term price volatility? It seems to me that yearly limited tinkering with a steadily rising price is more than enough. For heating oil a price spike in a cold winter is vital, it suppresses short term demand, increases short term supply and encourages inventory holding, all of which ensures there won't be a shortage. For carbon, what exactly is the benefit of prices going up in a cold winter? What good does that do? --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups Global Change ("globalchange") newsgroup. Global Change is a public, moderated venue for discussion of science, technology, economics and policy dimensions of global environmental change. Posts will be admitted to the list if and only if any moderator finds the submission to be constructive and/or interesting, on topic, and not gratuitously rude. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [EMAIL PROTECTED] For more options, visit this group at http://groups.google.com/group/globalchange -~----------~----~----~----~------~----~------~--~---
