Adele Morris and Evan Weber:
Since the release of the final rule, much attention has been given to how states can trade emissions allowances across borders to reach goals jointly, allowing more abatement where costs are lowest. The requirements for these complicated schemes occupy hundreds of pages of the rule, while EPA devotes only one sentence (in the preamble) to the potentially equally cost-minimizing carbon tax approach. The agency clearly prefers cap-and-trade over other options, as evidenced by the detail in the rule and EPA’s accompanying proposed federal plan for states who do not submit an acceptable (or any) implementation plan.
However, another factor accounts for EPA’s apparent short shrift for a tax approach: the concept is remarkably simple to understand—one-sentence simple—and just as easy to administer. By gradually increasing the cost of emitting greenhouse gases from coal- and natural gas-fired power plants by charging a per-ton fee for the CO2 emissions the plants already monitor, states could both reduce electricity demand from fossil fuel sources and level the playing field for zero-emissions alternatives like wind and solar. States already know how to implement such a tax; every state already taxes fuels such as gasoline, diesel, and natural gas. A state would just need to show, by modeling (the kind EPA already does), that its proposed carbon tax trajectory will hit its Clean Power Plan target and be prepared to adjust it or take other actions if emissions are off course.
