Should Oil Spill Lead to Cap and Trade Energy Tax?

There are Republicans who want to pass legislation. Sen. Richard Lugar, R-Ind., has a proposal that focuses only on raising fuel efficiency standards, building codes and encouraging the retirement of old coal plants and development of new nuclear plants. Most Democrats say his approach is not comprehensive enough.

A bipartisan proposal has been floated by Sens. Susan Collins, R-Maine, and Maria Cantwell, D-Wash. It would place a less-inclusive price on some carbon emissions, but divert any proceeds back to taxpayers in the form of a dividend.

"I agree with the president's goal that we must expand and diversify American energy resources, but we have different means of achieving that goal," said Collins after Obama's speech Tuesday.

Beyond the political difficulties of passing cap and trade legislation, or any other sweeping energy bill, there is some question about whether it would work to reduce the amount of oil consumed by the United States.

The only way to truly move the U.S. away from oil is to place a tax on oil, according to Adele Morris, who is Policy Director for Climate and Energy Economics at Brookings.

"The most efficient policy to reduce oil consumption is to tax it, but of course many view that as political suicide," she said, arguing that only a tax would effectively work to change people's behavior with regard to oil.

Cap and trade proposals, she said, would do more to effect greenhouse gas emissions than cut down on the use of oil. Most large emitters, she pointed out, aren't using oil.

"So if you want to address climate change at the lowest cost, you're going to reduce pollution mostly from sources other than oil for the foreseeable future. If you want to do something about oil, you need a price signal to discourage in that's higher than a climate bill would impose," said Morris.

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