Combating Global Climate Change: Why a Carbon Tax is a Better Response to Global Warming than Cap and Trade

Abstract:     
The leading proposal in the United States and abroad for addressing global climate change is some form of a market-based cap and trade system. But an international environmental crisis is not the time to experiment with a largely untested regulatory system on a global scale, and it is far from clear whether a cap and trade system can be implemented and enforced successfully. A more efficient and effective market-based approach to reducing carbon dioxide emissions would be a carbon tax imposed on all coal, natural gas, and oil production. A carbon tax (1) could be implemented almost immediately, (2) would not raise complicated enforcement issues, and (3) would generate revenues to fund research and development of alternative energy and other programs to reduce greenhouse gas emissions. A carbon tax also could be implemented in advance of any international agreement on carbon dioxide reductions, thus providing the United States much needed credibility in those international negotiations.

Number of Pages in PDF File: 54

Keywords: Climate Change, Environment, Tax

JEL Classification: K32, K33, K34

working papers series