Cap vs. Tax

Cap and trade and a carbon tax are two distinct policies aimed at reducing greenhouse gas (GHG) emissions. Each approach has its vocal supporters. Those in favor of cap and trade argue that it is the only approach that can guarantee that an environmental objective will be achieved, has been shown to effectively work to protect the environment at lower than expected costs, and is politically more attractive. Those supporting a carbon tax argue that it is a better approach because it is transparent, minimizes the involvement of government, and avoids the creation of new markets subject to manipulation.

The resources below provide a overall of the cap and trade vs. carbon tax debate:

• Climate Policy Memo: Cap and Trade vs. Taxes explores both the fundamental similarities between cap and trade and tax regimes, but also the important differences between them.
• Congressional Policy Brief: Tax Policies to Reduce Greenhouse Gas Emissions outlines the motivation for and key features of a tax designed to reduce emissions of greenhouse gases (GHGs).
• Eileen Claussen's opinion piece feature for Yale Environmental 360, "Putting a Price on Carbon: An Emissions Cap or a Tax?" (May 7, 2009)
• USCAPs Issue Brief "Cap and Trade vs. Carbon Tax" (March 2009)