Global Warming Economics

Tom Redburn posted an interesting article in the New York Times on the debate for how to prevent climate change. Indeed, global warming is one of the most controversial topics that will likely be a significant factor in deciding the outcome of the 2008 presidential election. As the battle heats up, there becomes increasing talk on different methodology for reducing carbon emissions...

The first set of theorists propose a "cap-and-trade" model, under which a limit on the amount of CO2 that can be pumped into the atmosphere is set and, ideally, is lowered over time. The second set advocate a carbon tax, of which the revenues would, ideally, "be used to offset other taxes in ways that could compensate lower-income households and minimize damage to the economy."

Both theories have their merits and their faults, as discussed in the aforementioned article. The carbon tax seems to provide a more calculated, long-term approach for reducing carbon emissions, although it will be the expense of significantly higher gas and energy prices. Arguments for the cap-and-trade model seem to be mostly political (people don't like their gas prices to be raised)--and I generally don't subscribe to political rhetoric. Though, the theory that we need a specific reduction rate strikes me as a legitimate one.

Read the article for more details.