Leading The Way:

• Author: Senator Jeff Bingaman
• Pages: 02

Senator Jeff Bingaman was elected to the United States Senate in 1982, as a Senator from New Mexico. Since then, he has helped to solve real problems facing the citizens of the United States. As Chairman of the Senate Committee on Energy and Natural Resources, he is a leading voice on issues related to national energy policy and global warming.
In 2007, the Nobel Prize-winning Intergovernmental Panel on Climate Change (IPCC) released a comprehensive report summarizing the current state of climate science. In their Summary for Policymakers, the panel concluded that warming of the climate system is "unequivocal" and that the historic rise in global temperature is (with over 90 percent confidence) due to human activities, mainly fossil fuel burning and deforestation.
In effect, this report, which also included contributions on impacts, adaptation and mitigation, confirmed what many scientists and climate researchers had known for many years - that human-induced global warming is real, that the impacts of unchecked warming will likely be severe, and that effectively tackling the problem will require new, innovative policy solutions. On Capitol Hill, there is now a palpable eagerness to confront this challenge, and I am pleased that we have started to grapple with the many complex issues related to implementation.
Of course, given the magnitude of the task at hand, we would be wise to consider our options carefully. Legislative proposals have so far focused on two types of market-based solutions: a tax on carbon emissions and an economy-wide cap-and- trade system, which would cap the overall level of greenhouse gas emissions, issue or sell tradable permits to emitters, and allow such entities to trade with one another in order to achieve reductions at the lowest possible cost. Because permits have value, a cap-and-trade system also imposes a price on carbon; the only difference is that the price is determined by the market, not set by the regulator.
In theory, both mechanisms can foster economically efficient outcomes. The two differ primarily in their response to future uncertainty. Simply put, a carbon tax yields certainty in the price of carbon at the expense of certainty in the environmental outcome, while a cap-and-trade system yields certainty in the environmental outcome at the expense of certainty in the price of carbon.
In examining these different approaches, I have come to the conclusion that a cap-and-trade system - modified slightly to...