Climate Change and the Deficit

Over at the National Journal’s Economy blog, John Maggs asks some budget experts for recommendations of how President Obama can bring the budget deficit down by 2016.

Here’s an excerpt from my contribution:

President Obama should combine his concern about climate change with his concern about the budget. …  President Obama should demand … that any climate change bill achieve significant deficit reduction. For example, he could refuse to sign any cap-and-trade bill unless it auctions a large fraction of the allowances and dedicates the resulting revenues to deficit reduction. … A reasonable approach could easily reduce deficits by $300 to $400 billion over the next ten years, including both the value of the allowances and lower interest payments.

2 thoughts on “Climate Change and the Deficit”

  1. Did you use cap-and-trade because you think it is preferable to a carbon tax, or because the House has passed cap-and-trade legislation? If you do think cap-and-trade is preferable, why?

  2. Hi ROA — Yes, I chose cap-and-trade because that’s what’s in the bills that Congress has been considering. With each passing day I become more of a fan of carbon tax than cap-and-trade, given the myriad ways that rent-seeking is contorting the cap-and-trade proposals.

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