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2010-07-12

Link between carbon price and ETS unnecessary

Comments on Frank Jotzo “Climate action an issue that will not fade”, 10/07/2010, http://www.eastasiaforum.org/2010/07/10/climate-action-an-issue-that-will-not-fade/
The proposal to allocate more of the revenue from carbon tax to consumers rather than to shareholders is a sensible one in the right direction.

The middle way proposal to have a low carbon price with an ETS structure does not appear to be so sensible – why should a carbon price be necessarily linked to an ETS? It will have the same problems with any ETS.

A clean carbon tax can stand on its own to achieve all important objectives of emission reductions and does not need an unnecessary ETS to mess up the system.

A carbon tax coupled with returning the revenue to all residents will be far better and superior option than a limited and often heavily distorted ETS. It is highly likely to have strong public support.

An equivalent carbon tax on border trade can avoid or reduce carbon leakage. Coupled with compensation for low emission countries on per capita basis, it will be internationally acceptable as well.

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