Carbon Taxes vs. Cap and Trade: A Critical Review / Lawrence H. Goulder, Andrew Schein.

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Goulder, Lawrence H

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w19338.Publication details: Cambridge, Mass. National Bureau of Economic Research 2013.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: We examine the relative attractions of a carbon tax, a "pure" cap-and-trade system, and a "hybrid" option (a cap-and-trade system with a price ceiling and/or price floor). We show that the various options are equivalent along more dimensions than often are recognized. In addition, we bring out important dimensions along which the approaches have very different impacts. Several of these dimensions have received little attention in prior literature.Abstract: A key finding is that exogenous emissions pricing (whether through a carbon tax or through the hybrid option) has a number of attractions over pure cap and trade. Beyond helping prevent price volatility and reducing expected policy errors in the face of uncertainties, exogenous pricing helps avoid problematic interactions with other climate policies and helps avoid large wealth transfers to oil exporting countries.

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Working Paper	Biblioteca Digital	Colección NBER	nber w19338 (Browse shelf(Opens below))	Not For Loan

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August 2013.

We examine the relative attractions of a carbon tax, a "pure" cap-and-trade system, and a "hybrid" option (a cap-and-trade system with a price ceiling and/or price floor). We show that the various options are equivalent along more dimensions than often are recognized. In addition, we bring out important dimensions along which the approaches have very different impacts. Several of these dimensions have received little attention in prior literature.

A key finding is that exogenous emissions pricing (whether through a carbon tax or through the hybrid option) has a number of attractions over pure cap and trade. Beyond helping prevent price volatility and reducing expected policy errors in the face of uncertainties, exogenous pricing helps avoid problematic interactions with other climate policies and helps avoid large wealth transfers to oil exporting countries.