A Tax-Based Approach to Slowing Global Climate Change

This paper discusses the design of CO 2 taxes at the domestic and international level and the choice of taxes versus cap and trade. There is a strong case for taxes on uncertainty, fiscal, and distributional grounds, though this critically hinges on policy specifics and how revenues are used. The efficient near-term tax is at least $5-$20 per ton of CO2 and the tax should be imposed upstream with incentives for downstream sequestration and abatement 0 other greenhouse gases. At the international level, a key challenge is the possibility that emissions taxes might be undermined through offsetting changes in other energy policies.