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Cap-and-Trade Better Than Carbon Tax

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Saturday, February 21, 2009

I disagree with the Feb. 16 editorial "Climate Change Solutions" in its promotion of a carbon tax and its criticism of cap-and-trade approaches. Cap-and-trade regimes have greater prospects of success in reducing greenhouse gas emissions than a carbon tax would. While a carbon tax provides certainty about the price of emissions, it does not ensure that the environmental objective -- absolute emissions reductions -- is achieved. Cap-and-trade does.

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The Post's criticisms of the European Union's emissions trading system fail to recognize the significant improvements since the first phase ended in 2007, including more stringent caps and auctioning of allowances to avoid windfall gains. Analysts say that the system is working as designed and is delivering emissions reductions. This week, New Carbon Finance, a financial information provider, estimated that 2008 emissions were down 3 percent from 2007 levels, and that "the largest cause of the reduction is the [emissions trading system] itself encouraging greater use of gas in power generation."

The system guarantees significant emissions reductions up to 2020 and beyond, and under it companies have both regulatory certainty and the flexibility to find the best emissions reductions for their situations. Phasing in the auctioning of allowances facilitates the transition to a low-carbon economy while recognizing concerns of economic sectors in which companies or plants may move to countries with less-stringent emission regulations. It also protects poorer member states. This is good for companies, for jobs and the E.U. economy.

JOHN BRUTON

Ambassador

Delegation of the European Commission

Washington

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