Crawl Across the Ocean

Tuesday, June 03, 2008

Carbon Tax vs. Cap and Trade

If you're interested in the relative merits of carbon taxes vs. cap and trade systems to reduce greenhouse gas emissions, you could do worse than go read this post at Economist's View, and follow the links and read the comments.

Short version (my opinion): Both are better than the status quo or most other regulatory approaches. From an economic point of view, there is little to choose between the two approaches in terms of efficiency. Cap and Trade is more complicated to set up (especially if yo want it to apply beyond large industrial emitters) but has the advantage of making it easier to target the level of emissions you want, while the carbon tax is simpler to get going but likely will need constant adjustment (upward, if B.C.'s small carbon tax is a sign of things to come) in order for it to have the required impact in terms of reduced emissions.


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