Cap and Trade: The Price Levels Wouldn’t Suffice

According to Carnegie Mellon University professors, a cap and trade system in the United States would fall short of bringing about any meaningful environmental improvements. By analyzing the cap and trade pricing models that have been proposed, these professors conclude:

The price levels being discussed aren’t enough to bring about the huge changes needed to meet a cut of up to 80% of GHG [Greenhouse Gas Emissions] emissions by 2050…

In essence, the proposed carbon credit prices would not be large enough to bring about significant emission cuts. Furthermore, the prices of these carbon credits would not provide incentives for “the most innovative plants to be built.” The report elaborates on this as it states:

For example, to have a coal plant with carbon capture and storage make economic sense, allowance prices would have to be around $50/ton.  Even at $40/ton, it would be cheaper to build a traditional pulverized coal plant and pay compliance costs.

This is just another study that reveals why cap and trade would be economically inefficient. Therefore, it would be imprudent to rush to pass such an expensive, far reaching piece of legislation. The Murkowski Resolution aims to keep the EPA’s threat to impose backdoor carbon regulations from forcing Congress to rush through a cap and trade bill.  Given the huge costs of a cap and trade bill and the fact that it will not be effective in providing the necessary incentives to reduce carbon emissions, it is important to carefully evaluate both the benefits and costs of such a program before forcing Congress to vote for a cap and trade program that would place the government in charge of 8 percent of the economy.