Argument: Carbon trading schemes impair government revenue and budgets

Issue Report: Cap-and-trade versus carbon tax

Support and analysis

US Congressional Budget Office April 2007 Report, “Trade-Offs in Allocating Allowances for CO2 Emissions” – “A cap-and-trade program for CO2 emissions would tend to increase government spending and decrease revenues. Like other consumers, the government would face higher prices for energy and other carbon-intensive goods and services. In addition, by leading to a decline in the production of such goods and services, the cap would cause a decline in the taxes collected on corporate profits. If the government wanted to provide the same level of services without increasing the budget deficit, it would have to either raise taxes or use part of the value of the allowances to cover the changes in federal outlays and revenues.”