The reason that carbon trading is more popular than carbon taxing is precisely because trading is less transparent and thus allows loopholes and offsets for industry. So the industrial and commercial lobby will be behind it.

By contrast, the great transparency of a carbon tax leaves little to manipulate and no room for loopholes. So industry doesn’t like it at all.

If you give dividend to the taxpayer, industry won’t get it. If you give it to industries, the taxpayer will be unhappy.

This is a tradeoff that is unavoidable and has severe political consequences.

OK, badly posed question. Everyone can’t answer. Revised question: why aren’t you saying it.

If the present, ultrahuge petrodollar flow from the middle class and the working poor to civil servants and government contractors is a cashflow whose equal dividing-out cannot even be discussed, what weight can there be in proposal to make it even more hypergigantic, and then return it to the citizens in equal dividends?

It will be necessary to show, first of all, that the mention of the dividend represents a genuine intention. The only way to show that intention is by acting accordingly.

(How fire can be domesticated)

Where are all the carbon taxes if what you say is true, i.e. that it is “political suicide” to oppose them?

Carbon tax revenues on expensive fuels are gigantic. If angels started pushing all our cars, trucks, and aircraft, so that refuelling became unnecessary, millions of public servants would soon be dismissed. Or tens of millions would get salary reductions; probably the latter.

Carbon tax under that name, on all fossil fuel carbon rather than just the most lucrative, seems to be hard to impose. As I’ve said before, hoping everyone would start saying it, if you intend to divide out the proceeds of a new carbon tax, why not start by dividing out existing carbon revenues. That would be a tax cut. “Dividend first”, I said.

Why isn’t everyone saying it?

(How fire can be domesticated)

Many who are very familiar with BC politics would disagree with your interpretation, i.e. that it is suicide to oppose introduction of a carbon tax. What seemed suicidal at the time was trying to put one in. The opposition party, which had not opposed the tax as it worked its way through the legislative process, was trailing the government in the polls until they seized on the widespread opposition to the carbon tax, especially in rural areas where voters like to drive big trucks which they claim are essential to their lifestyle. The Liberals, the party that brought in the tax, almost forced their leader to withdraw it. The leader, Gordon Campbell, told his party it was either accept the tax and go out and campaign for it, or he would not lead them. People such as myself who lived in BC at the time and have agitated there for climate action for more than twenty years saw the opposition party making political hay out of their opposition to the tax, and we were relieved to see them go down to defeat in the election, which seems most due to their reputation for not being good economic managers.

Furthermore, in federal politics in Canada in the last election, the opposition party lost the election with a carbon tax as the centerpiece of its campaign. The leader, Stephane Dion, talked about the “Green Shift” where he was going to tax carbon and remove taxes from other things, and failed so badly that he was replaced right after the election in an emergency procedure the party cooked up so they wouldn’t have to wait for a convention. The new leader avoided the topic of carbon taxes for a long time, saying if Canadians rejected the idea as the stupidest thing they ever heard, he couldn’t disagree.

In the EU, after many years trying to get carbon taxes in, they finally went for cap and trade after they were convinced that by doing so they could bring the US into the Kyoto Protocol.

Where are all the carbon taxes if what you say is true, i.e. that it is “political suicide” to oppose them?

If the holders of permits see that the price is continuing to rise they will continue to buy them and the price will stay high.

With taxes, you pay for what you use, so you never over invest to avoid potential losses associated with potential exposure to future permit price rise losses. Of course, if you do over invest, you can sell your permits and defray losses, so the gamble is less of a gamble.

On the other hand, using some smoothing mechanism with a cap and trade or something that puts a floor under emissions prices, may be more effective than just bunging on a tax.

With a tax, you still get the volatility that is already there in energy markets, ie look how the price of oil goes from year to year.

Also,importantly, as Matt Buckels says, remember that with a tax you have to pick the right rate to get emissions down fast enough but not so fast the economy suffers too much.

That’s a problem because if you have to adjust the tax rate from time to time, or if emitters expect they will be successful in arguing it lower, then that increases the option value of doing nothing and reduces the certainty facing invstors in alternatives just the same.

I think either would work, but it’s a mistake to think a tax is some sort of magic bullet.

Also the argument is that it is difficult to set the tax at the right level, too high you inflict unnecessary pain, too low and you don’t meet your emissions targets. And Gaz is right, if we were discussing a tax you’d be getting the same opposition from emitters who want exemptions, and you’d be getting arguments within the AGW camp saying should be a cap and trade. You can’t win:)

But it is a big problem and I can’t see any reason to suppose avoidance will be a bigger problem with cap and trade than with a tax.

Is anyone suggesting the cattl and sheep lobby in Australia would have been any more receptive to a tax than to an ETS? Or had nothing to say about just how much tax would apply to beef?

Matt Buckels – you are right – a cap-and trade will transmit price signals effectively, no matter at what stage the cost is added.

Nuclear Australia – you’re the first person I’ve come across who doesn’t seem to think a cap and trade system would affect prices faced by consumers. You need to think a bit more carefully about this.

You won’t have to buy any permits. Their cost will be reflected in the price of stuff you buy.

So, if the price of petrol goes up 200% and the price of a train ticket goes up 5%, you can then make your commuting decision based on that.

The Dept of Climate change estimates only about 1000 businesses will be *directly* affected by the CPRS.

All anyone else will have to do is work out whether they are prepared to pay the extra costs of the permits which those businesses will add to the price of goods and services.

How many permits will I need to obtain for my weekly commute to work? From whom do I buy them, and how much will they cost and a Cap and Trade scheme?