Carbon Pricing
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Carbon Pricing

Design, Experiences and Issues

Edited by Larry Kreiser, Mikael S. Andersen, Birgitte E. Olsen, Stefan Speck, Janet E. Milne and Hope Ashiabor

Carbon Pricing reflects upon and further develops the ongoing and worthwhile global debate into how to design carbon pricing, and how to utilize the financial proceeds in the best possible way for society. The world has recently witnessed a significant downward adjustment in fossil fuel prices, which has negative implications for the future of our environment. In light of these negative developments, it is important to understand the benefits of environmental sustainability through well-documented research. This discerning book considers the design of carbon taxes and examines the consequential outcomes of different taxation compositions as regulatory instruments. Expert contributors assess a variety of national experiences to provide an empirical insight into the use of carbon taxes, emissions trading, energy taxes and excise taxes. The overarching discussion concludes that successful policies used by some countries can be implemented in other jurisdictions with minimum new research and experimentation.
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Chapter 2: The cost of enforcing carbon pricing mechanisms: a comparison of the British Columbia carbon tax and the Québec emissions trading system

Nathalie Chalifour and Jacques Papy


There is widespread agreement within economics that carbon pricing is an efficient means of reducing the greenhouse gas (GHG) emissions contributing to climate change. The two most common carbon pricing instruments are carbon taxes and emissions trading (cap and trade) systems. There has been a vibrant ongoing debate, supported by an abundance of research, about the relative merits of taxes versus trading systems for achieving cost-effective, lasting GHG reductions.6 Increasingly, scholarship shows that the instrument choice question is not an either/or proposition, since policies can be combined in various ways, such as using regulations to set an allowable level of emissions (a ‘cap’), allocating permits for some economic actors to trade their allowances within the cap, and imposing carbon taxes on actors not covered by the emissions trading system, or even throughout the entire economy. Ultimately, many factors will determine which instrument or combination of instruments is (or is not) applied in a given jurisdiction, many of which have to do with the relevant legal, socio-economic and public policy context, not to mention the political ideologies of the decision-makers in power. Comparative analyses of carbon taxes and emissions trading systems consider many different variables in evaluating which instrument is optimal in a given set of circumstances. These include, inter alia, environmental effectiveness, economic efficiency, administration/implementation, distributional impacts, political feasibility and price certainty/volatility.

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