Clearing the Air: Carbon Tax or Cap and Trade?

Clearing the Air: Carbon Tax or Cap and Trade?

March 13, 2017

Carbon cap and trade and carbon taxation are two very different strategies to address the challenge of greenhouse gas emissions. A look at the political and economic issues that drive each.

Carbon taxation and carbon cap and trade have been implemented with varied success as greenhouse gas reduction strategies in recent years. Carbon taxes have gone into effect, seemingly counterintuitively, where the energy industry looms large. And cap and trade programs have operated broadly across Europe, and regionally in parts of the U.S. Energy Policy Now guest Jim Hines, Professor of economics and law at the University of Michigan, provides insight into the workings of cap and trade and carbon taxation, and explains the unique set of factors that may make one policy more politically acceptable than the other.

Jim Hines is a professor of law and economics at the University of Michigan and an editorial advisor to the Kleinman Center for Energy Policy at the University of Pennsylvania. His research is focused on various aspects of taxation. He is a research associate with the National Bureau of Economic Research, and research director of the International Tax Policy Forum.

More information on carbon reduction is available here: Taxing the Tar Sands