Washington (Platts)--9Jun2008

The US should put a price on CO2 to help mitigate climate change, a panel
of economists assembled by an independent US government agency said Monday.

     Despite the agreement that a market-based method would best combat
climate change, the 18 panelists were split over what system to enact, the
Government Accountability Office said in a report.

     Seven said they want a carbon tax, eight want an emission trading market
with a cap on the price of CO2 and three urged enactment of an emissions
trading market without a price cap.

     Senator Barbara Boxer, a California Democrat and chairwoman of the
Environment and Public Works Committee, requested the report. She introduced a
bill to create an emissions-trading market without a price cap that failed to
pass the chamber last week.

     Another bill in the Senate, which has gained support from key swing votes
among moderate Republicans, would create an emissions trading program with a
price cap.

     One of the biggest debates in solving climate change has been whether to
put a direct price on greenhouse gas emissions through a carbon tax or to set
a cap on emissions and let companies trade permits to pollute.

     Supporters of the "cap-and-trade" methodology, where an emissions cap is
set and companies can trade permits to pollute, say that it provides
environmental certainty. Proponents of the carbon tax idea praise it for its
economic certainty and that it would avoid the bureaucratic pitfalls of an
emissions trading regime. The two could also be combined for an emissions
price cap in a cap-and-trade program.

     "The panel rated estimates of costs as more useful than estimates of
benefits for informing congressional decision making, with some panelists
citing uncertainties associated with the future impacts of climate change as a
limitation to estimating benefits," the GAO said. "Fourteen of the 18
panelists were at least moderately certain that the benefits of their
suggested portfolio of actions would outweigh the costs."

		--Alexander Duncan, alexander_duncan@platts.com

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