Look around! We are seeing an emerging consensus on the need to put a price on carbon. Of course, once it has been agreed that there needs to be a price on carbon, economists then like to debate how this should be done. Some economists like a carbon tax, most argue strongly that an emissions trading scheme is better. At CO2 Australia we also think an emissions trading scheme is better. Why? First we need to focus on the problem we’re trying to fix – that is greenhouse gas emissions going into the atmosphere. Most emissions trading schemes start by putting a cap or an upper limit on greenhouse gas emissions. This directly addresses the problem of emissions. On the other hand a carbon tax simply charges companies by the amount of carbon they emit; the idea is that because it costs to emit, the companies will find ways of reducing or abating their emissions. In short, an emissions trading scheme will produce a known amount of emissions abatement at an unknown price, but cheapest cost, whereas with a carbon tax the price of carbon might be known but the amount of abatement is not. Some people argue that a … Continue reading Putting a price on carbon