The Core Tension of Cap and Trade

The Core Tension of Cap and Trade from Roger Pielke, Jr. on Prometheus blog:

“This quote from an anonymous White House official in The Washington Post sums up the core tension of cap and trade.

We think a well-designed cap-and-trade program will not have an adverse short-term impact on energy prices. But if we’re completely eliminating the price signal, then we’re removing the incentives for investments in energy efficiency.

No cap and trade bill can at once send a meaningful price signal while at the same time not have an adverse impact on energy prices (in short or long terms). The following description of cap and trade in the Washington Post story also reflects this core tension:

. . . climate legislation will aim to reduce emissions by putting a price on carbon, raising the cost of everything from gasoline to plastics to electricity.

Will Congress act to raise the cost of everything? I don’t think so.”