- tax systems are well known and all countries use taxes;
- implementation of carbon price is very simple;
- it would provide consistent and stable price signals and a growth curve that would favor emission reduction policies to avoid cost increase for the CHG emissions;
- revenues go to governments.
- quantity of emissions is uncertain under a carbon price mechanism
- quantity of emissions is certain so the GHG reduction curve can be better controlled
- limited international experience with cap &trade mechanism;
- more complex to be implemented and regulated due to the involvement of many external;
- the price of carbon would highly fluctuate giving inconsistent signals to private sector decision makers.
- not do not go to governments when emission permits are allocated for free to make the mechanism more acceptable (most of the cases).
Both systems have pros and cons but both systems can work and contribute to GHG emission reduction. They could also coexist with a reasonable mix. This could be for example the case of EU where a ETS system is already in place and this mechanism could be supported by a carbon price system on goods and services not covered by the ETS. But, having to decide between the two systems, we would opt for the carbon price system for its simplicity, transparency, predictability and secure revenues.
Research and innovation for low carbon technologies
Cutting taxes or giving incentives to new jobs and investments in the green economy
(energy efficiency, renewable energy production, circular economy, protection of the environment)
Support poor countries for the transition to a low carbon society
Support lower incomes by reducing taxation or giving discounts on goods and services in order to reduce the level of inequality