Every now and then I see a comment on the carbon-trading wars along the lines of: “Can’t we just have everything — rule-based regulations, carbon trading, carbon taxes, and public initiatives?”

The problem with this is that carbon trading and carbon taxes accomplish the same thing — they put a price on carbon. If carbon trading works, you don’t need carbon taxes. A call for carbon taxes is an admission that carbon trading doesn’t work well in putting a price on carbon.

Really, carbon trading is a kind of carbon tax. Yes, I know that most carbon credits are given away to big polluters to encourage them to support the scheme. But that does not stop it from being a tax. There is an old tradition of selling or giving away the right to tax to private individuals: it was called “tax farming”. So lets agree that the idea that both carbon taxes and emissions trading are needed is unlikely to be common ground.

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