I think that a carbon tax would be more effective than a cap and trade system because it makes the price of carbon predictable, which is very important if you are going to make clean energy investments. If you don’t know what carbon will be worth in the future, you may be less willing to risk changing the way you are doing things. While having set reduction benchmarks that a cap and trade system would provide would be nice, I think you could get those reductions with a proper tax and then at least everyone will know what things will cost and can use that information in their planning.
Carbon taxing would be a more straight-forward way of providing disincentives for carbon emissions. But there are many benefits to cap and trade that may prove it to be a more effective system – by actually allowing companies to sell unused credits, there is the benefit of an incentive rather than a tax. it also allows for an autonomous free trade market regulated by the government, as opposed to a government imposed tax, something that may gain the support of those in favor of less government involvement.
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