Regulated Industries
and Carbon Taxes
Tauna Szymanski
October 18, 2011
Bottom Line
• Given choice of cap-and-trade vs. carbon tax, industry is
divided
– Pros and cons to each
– Much will depend on design details
– Depends on where you sit
• But not at all clear this choice is imminent
– Most agree that no regulation is best, but even that
position is not uniformly shared
– Alternatives?
• Both are probably better than command-and-control
2
Priorities and Concerns
• Cost/bottom line impact
• Certainty/predictability/volatility
• Ease of compliance/transaction
costs/infrastructure
– Hedging, clearing, margining, legal
– Dodd-Frank
• Competitive pressures/leakage
• Flexibility
3
Priorities and Concerns (cont.)
• Transparency
• Efficacy
• Perception of control (who is setting the price:
government or the market)
• Gaming/rent-seeking: free allocation, tax
exemptions/credits/rebates
• Concerns over punitive taxes/government
picking winners and losers
4
Right Now
• Number 1 concern on Hill = government is out of money
– Spending problem or taxing problem?
– New mandates and taxes?
• Reliable, affordable energy in economic downturn
• EPA regulations
• CES – post-Bingaman future?
• Basic technology research funding support
– Encourage more hydrocarbons as way to fund RE
technology R&D?
• Private sector and technological approaches dominant
over next year?
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