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Tax or Trade

If you walked past a newstand on Saturday in London it was hard not to notice that climate change was back on the front page of the Independent — Oil giant comes in from the cold. The article, with its very bold headline, covered a recent speech by Rex Tillerson, CEO of ExxonMobil, in which he called for a carbon tax in preference to an emissions trading system. In his speech, strengthening global energy security at the Woodrow Wilson International Center for Scholars, Mr Tillerson also said that an emissions trading system was complex and added uncertaintly due to price swings.

I am not going to use this blog to argue with ExxonMobil, but I do think it is important to revisit the reasons why cap-and-trade (or emissions trading as we call it in the EU) is the policy instrument of choice in the EU and now Australia and is already operating in parts of the United States.





So there is a choice – an approach designed specifically to tackle the environmental challenge in front of us, but which offers flexibility and lowest cost for business whist still ensuring the environmental objective is delivered, or more taxation.

I will opt for cap-and-trade any day.

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