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.