Experience with Carbon Taxes and Greenhouse Gas Emissions Trading Systems

By Haites, Erik; Maosheng, Duan et al. | Duke Environmental Law & Policy Forum, Fall 2018 | Go to article overview

Experience with Carbon Taxes and Greenhouse Gas Emissions Trading Systems


Haites, Erik, Maosheng, Duan, Gallagher, Kelly Sims, Mascher, Sharon, Narassimhan, Easwaran, Richards, Kenneth R., Wakabayashi, Masayo, Duke Environmental Law & Policy Forum


INTRODUCTION

Whether carbon taxes or greenhouse gas (GHG) emissions trading systems (ETSs) are more effective at reducing GHG emissions has been widely debated in climate policy literature. (1) Lacking from this debate is empirical evidence documenting the performance of these instruments. This paper fills the gap by providing such evidence.

Economic theory indicates that pricing (2) GHG (3) emissions can minimize the cost to society of reducing emissions and so mitigating climate change. Carbon taxes and ETSs are two ways to price GHG emissions. A carbon tax imposes a price--the tax rate specified by the government--on each metric ton of GHGs emitted, measured as metric ton of carbon dioxide equivalent ([tCO.sub.2]e), but does not limit overall emissions. (4) A cap-and-trade system--the most common form of ETS--imposes a government-established limit on aggregate GHG emissions by specified sources, distributes tradable allowances (usually one [tCO.sub.2]e each) approximately equal to the limit, and requires regulated emitters to submit allowances equal to their actual emissions. (5) The market determines the price for allowances and thus the price per [tCO.sub.2]e emitted. A baseline-and-credit system--a less common form of ETS--specifies an absolute emissions or emissions intensity limit for each participant and allocates tradable credits ("allowances") to emitters who emit less than their limits. Emitters that exceed their limits can purchase credits from other participants to cover the excess emissions. Again, the market determines the price per [tCO.sub.2]e emitted.

A carbon tax and an ETS would yield identical results for equivalent emission reductions if there is no uncertainty regarding future prices, perfect competition in all markets, no interaction with other policies, and universal coverage (all sources of GHG emissions). In practice, the performance of carbon taxes differs from that of ETSs because these assumptions never hold. In a given jurisdiction, various factors including taxation authority, the emissions profile, and influence of large emitters can affect the choice and design of an instrument. Thus, the designs of carbon taxes and GHG ETSs, as well as their performance, vary across jurisdictions.

The performance of a carbon tax or ETS as implemented is further affected by some of the jurisdiction's other emissions-related policies, such as fuel taxes, energy efficiency standards, and renewable energy incentives. (6) External factors, such as economic recessions, fossil fuel prices, and natural disasters, (7) can affect the emission reductions achieved by a tax or ETS. (8)

This paper assesses the performance of carbon taxes and GHG ETSs operational at the end of 2015. (9) These instruments are assessed for environmental effectiveness (reduction of actual emissions), cost-effectiveness (marginal abatement cost), economic efficiency, public finance, and administrative issues. We do not make any causal claims between the observed emission reductions in a jurisdiction and its choice of policy instrument because, as noted above, many other factors affect actual emissions. The data and resources needed to disentangle the contribution of the instrument from the other factors were not available for this research. Nevertheless, useful insights can be drawn about the performance of the carbon taxes and GHG ETSs implemented to date.

The performance of many of the instruments implemented has been assessed from several different perspectives and with varying degrees of rigor, including those implemented by Alberta, British Columbia, California, Denmark, European Union ETS, Finland, Ireland, New Zealand, Norway, Regional Greenhouse Gas Initiative (RGGI), Sweden, and Switzerland. (10) In addition to assessments of individual instruments, a few studies review the performance of multiple instruments including the seven Chinese pilot ETSs, (11) ETSs for GHGs and other pollutants, (12) carbon taxes in multiple European countries, (13) and carbon taxes and GHG ETSs in eighteen jurisdictions. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Experience with Carbon Taxes and Greenhouse Gas Emissions Trading Systems
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.