Cap-and-Trade or Carbon Tax?

Recent reports have examined the strengths and weaknesses of the two systems. On April 7, the EcoFiscal Commission released The Way Forward: A Practical Approach to Reducing Canada’s Greenhouse Gas Emissions which employs policy analysis and new economic modelling to reach recommendations that every province should put a price on carbon, that existing and new policies should increase in stringency over time, should be designed to be as broad as practically possible, should be tailored to each province’s unique economic contexts and priorities, yet should be designed for longer-term coordination.

On April 13, Clean Energy Canada released Inside North America’s largest Carbon Market: Top Lessons from the Front Lines of Quebec’s Fight Against Carbon Pollution. Together with their February report, How To Adopt a Winning Carbon Pricewhich focused on British Columbia’s carbon tax, Clean Energy Canada provides what they call “under the hood” comparisons of the  two approaches to carbon pricing. 

 Sustainable Prosperity also weighed in with two Briefing Notes on April 23; Briefing Note #1

summarizes the rationale for pricing carbon, and the main policy approaches i.e. carbon tax and cap-and-trade. Briefing Note #2 reviews the key policy design criteria and considerations, and how they differ across approaches. 

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