A carbon tax is more free market, because it just puts a price on the externality and lets the market decide how to respond. Cap and trade involves setting a limit by fiat and allocating the initial permits. Some on the left see those attributes as features, because they get to pretend to control total emissions, and help "deserving" companies. In reality I expect cap and trade would be corrupted by rent seekers to a far greater extent than a carbon tax would be.
Economists generally view carbon taxes and cap and trade regimes as equivalent
I think this reflects a belief that raising the gas tax is political suicide and completely impossible.
Could be. From the conservative wonks I read there's a surprising amount of support for a higher gas tax, but you're right that it would be a hard sell to the public, compared to regulations where the costs are much easier to hide.
A carbon tax is more free market, because it just puts a price on the externality and lets the market decide how to respond.
Ryan Avent, an economist who focuses on these issues and writes for the, um, Economist, claims that there are no significant differences between the two policies: http://www.ryanavent.com/blog/?p=2011 I haven't heard your explanation before though, so do you have any experts who support this claim?
I agree with Greg Mankiw that cap and trade equals carbon tax plus corporate welfare:
Um, do you really think that the US tax code is generally free from corporate welfare giveaways? If you don't, then why exactly do you think that we could pass a carbon tax that would not have corporate welfare exemptions included? Do you think that corporate lobbyists are particularly powerless when it comes to changing the tax code?
It seems that giving away permits initially is superior to including an exemption in tax law. The giveaway is a one time cost; but exemptions live forever.
Beyond that, I agree with conservative economists Tyler Cowen and Alex Tabarrok that Mankiew's analysis is naive and incomplete: http://www.marginalrevolution.com/marginalrevolution/2009/05... ; that might be true for the ideal carbon tax with no exemptions for anyone that everyone agrees could never pass Congress. But there seems to be no point comparing a realistic cap and trade bill against an impossible to pass carbon tax.
From the conservative wonks I read there's a surprising amount of support for a higher gas tax
Interesting. I'd be curious which conservative wonks support a gas tax increase.
Economists generally view carbon taxes and cap and trade regimes as equivalent
I agree with Greg Mankiw that cap and trade equals carbon tax plus corporate welfare: http://gregmankiw.blogspot.com/2009/05/reading-for-pigou-clu...
I think this reflects a belief that raising the gas tax is political suicide and completely impossible.
Could be. From the conservative wonks I read there's a surprising amount of support for a higher gas tax, but you're right that it would be a hard sell to the public, compared to regulations where the costs are much easier to hide.