Corporations just pass the cost on to the consumer. The entire concept of a carbon tax rallies around the consumer, Main St, being the catalyst for change, as consumer spending makes up about 80% of the economy. Every price increase due to a carbon tax would be passed on to the consumer, and the consumer would be the one directly benefiting from the rebate check (and any profits if they reduce their use of carbon). Any increases in price that secondary producers in industry would incur from buying things from primary producers would again be passed onto the consumer.
Basically, it would take all the hidden costs of carbon/pollution that are currently buried in the system, and directly tie them into prices. Consumers would see this, and then use market forces to choose the cheapest/best product, which nine times out of ten would probably be the one that took less carbon to produce it (and thus, lower cost).
Because economically, cap-and-trade will do nothing to actually reduce pollution.
Think about it. By putting an industrial price on carbon, and allowing companies to “sell” carbon credits, you put a value on carbon which is directly tied to demand. Companies which reduce their pollution can sell credits to companies which don’t.
But what happens if all companies were to reduce their carbon footprint? The carbon markets would be flooded with supply, and the carbon market would completely collapse. There’s just no incentive for the entire economy as a whole to reduce the carbon output under cap and trade, except for the fact that carbon traders on Wall St would profit off price increases on Main St.
The point of environmental legislation should be to reduce pollution, not perpetuate it under false pretenses.
Let’s compare this to a carbon tax. Let’s say everyone reduces their carbon emissions, through greener measures. The amount of money collected by the carbon tax would be less, so the rebate everyone would receive would again be less. But this isn’t a problem, as the rebate (and potential to profit) is designed to get us “over the hump” to move from a fossil fuel economy to a greener industry. Once we’re on the other side of that hump, there will be a point where continuing to go greener will become a matter of declining return on investment. Economic market-forces would drive the system into a system equilibrium between cost of carbon and declining ROI.
Thus, there wouldn’t be any point to embark on any green action which lacked economic feasibility. So rather than set hard goals for pollution reduction, it would simply let the system itself work out the best possible reduction in pollution for the prices people are willing to pay. Depending on what the value of carbon is set at (let’s say it slowly increases over fifty years until it permanently plateaus), the economy will find the best solution on its own (and a slowly increasing tax over time would give enough time for engineers and scientists in R&D to come up with newer, better technology without breaking the bank).
That’s the beauty of the system, you don’t need to. We know scientifically that a ton of coal emits X amount of CO2 when burned, that oil emits Y amount of CO2 when burned, etc. Yes, there are technologies to scrub some of the harmful pollutants from the combustion process, but these are already covered by existing regulations.
But it will only be a penny here or there, it will take many of us doing these little things to have a true impact!