Or, at least, all of Mark Thoma's Economist's View readers think that I'm an idiot. Mark comments on Glenn Hubbards advocacy of cap-and-trade (and a reduction in the corporate income tax with the auction revenues) vs. Greg Mankiw's advocacy of a carbon tax:
Looks like it's time for two former chairmen of the Council of Economic Advisers for the Bush administration, Glenn Hubbard and Greg Mankiw, to settle this tradable permit versus carbon taxes issue once and for all. I propose an Econoduel. Mankiw versus Hubbard, whiteboards only, any theory goes, and you cannot be saved by the end of period bell. We'll need a referee, so I'll suggest John Whitehead at Environmental Economics as he seems relatively unbiased - he doesn't think there's much difference between the tradable permits and carbon taxes and doesn't really care which one we put into place, as long as we do something.
As I've said before, in the most basic model, there is no difference in the efficiency aspects of a carbon tax and cap-and trade. I've finally formalized the textbook explanation on this blog. See ECON 101: Carbon Tax vs. Cap-and Trade. Again, I'm not ignorant of the vast literature contrasting these approaches with various tweaks to this most simple model. I simply don't think the tweaks make much practical difference, once we have adopted economic incentives over command and control regulation.
