Heads up Pigou Club!

From the CBO Director's Blog:

As I have noted earlier, I will occasionally use this blog to clarify misinterpretations of our work.  On that note, some recent blog postings seem to warrant a clarification of the main points in CBO’s study, Policy Options for Reducing CO₂ Emissions, regarding what policy analysis has to say about the trade-off among different policies to reduce carbon emissions.

CBO’s study evaluated a variety of incentive-based approaches—including taxes on carbon dioxide emissions and several variants of cap-and-trade programs—that policymakers might use to achieve long-term emission reduction targets. Key conclusions include:

...

• A cap-and-trade program that included both a ceiling and a floor on the price of allowances or an emissions tax would be the most cost-effective policies.

Note: Pigou Clubbers are wont to ignore cap-and-trade.

Comments

[Charles Young]

But, of course, the CBO study ranks a CO2 tax as the most efficient policy (see summary table 1 of the CBO report).