Recently, it has been demonstrated that pre-existing distortionary taxes can substantially increase the costs of market-based instruments which do not raise revenue, such as non-auctioned emissions quotas. Revenue-raising market-based policy tools, such as carbon taxes, encounter other problems:...

Recently, it has been demonstrated that pre-existing distortionary taxes can substantially increase the costs of market-based instruments which do not raise revenue, such as non-auctioned emissions quotas. Revenue-raising market-based policy tools, such as carbon taxes, encounter other problems:...

Revenue-raising environmental policy instruments, such as carbon taxes, tend to be politically controversial. In practice, carbon taxes are often differentiated between polluters, implying unequal marginal abatement costs. Grandfathered tradeable permits seem less controversial; this instrument...