Fundamental Theorem of Carbon Taxation

Greg Mankiw serves up what he calls the Fundamental Theorem of Carbon Taxation:

… Economists recognize that a cap-and-trade system is equivalent to a tax on carbon emissions with the tax revenue rebated to existing carbon emitters, such as energy companies. That is,

Cap-and-trade = Carbon tax + Corporate welfare. …

Yet one more nail in the coffin for rationalizations for "cap and trade" and one more endorsement for setting up "carbon tax" schemes. Or is it? Differing opinions?

Comments

[Seth Baum]

Hill Heat
http://www.hillheat.com/
has ongoing coverage of climate policy. Unfortunately, it's low traffic so far.

[Trinifar]

I'm not sure why this is even a question. Cap and trade says this isn't a serious problem. We can go on with business as usual while diverting some resources to mitigating the "perceived" problem. Carbon tax on the other hand says we have a real problem that requires a reduction in carbon emissions. What nuance am I missing?

[stefan]

We enjoy your blog and have linked it to our site. I was hoping we could exchange links.

Our blog My Green Element, www.mygreenelement.com covers all issues related to sustainable communications.

The Element Agency is a green communications and marketing agency. See our homepage at www.theelementagency.com.

Please let me know what you think. By the way, we welcome guest bloggers.
Best,
Stefan