Dodd's bold proposal on emissions

By Other Views: Washington Post
Published May 15, 2007

One of the benefits of being in the second tier of presidential candidates is feeling freer to promote worthy ideas that might seem too risky to a front-runner. That may be the case with Sen. Chris Dodd, D-Conn., whose plan to tackle climate change involves a bold move for any politician: a new tax - in this case, on carbon emissions.

Dodd would couple the tax with legislation to mandate reductions in greenhouse gas emissions and raise automobile fuel economy standards to 50 miles per gallon by 2017. Dodd's tax proposal in particular goes far beyond the standard fare of the better-known Democratic candidates, who advocate a cap-and-trade approach to spur companies to reduce emissions combined with other incentives to increase production of renewable energy and to cut consumption.

Under cap-and-trade, government sets a limit on the amount of carbon dioxide that could be emitted. It would issue allowances to companies that emit CO2, which would be able to buy and sell these rights. The theory is that the market would reward those able to reduce their emissions and make money from selling the rights.

In theory, a cap-and-trade system could achieve the same ends as a carbon tax. In practice in Europe, cap and trade, at least in its early stages, has proved ineffective and susceptible to manipulation. Those who advocate this approach ought to explain why this cumbersome system is better than a straightforward tax.

Conversely, Dodd and other backers of a carbon tax need to address its drawbacks. What happens to particularly emissions-intensive sectors such as the coal industry, for instance, when an across-the-board carbon tax is imposed? Would a tax end up being so riddled with loopholes as to be ineffective?

Neither a U.S. cap-and-trade system nor a U.S. carbon tax will, in itself, deal with the fact that the greatest growth in greenhouse emissions is in the developing world, particularly China and India. But a domestic policy that encourages the development of alternative technologies could reap a double benefit, generating U.S. sales of these innovative products overseas and helping address greenhouse gas emissions there as well.