Incentive-based policies, such as emissions taxes and emissions permit trading schemes, are increasingly used to regulate greenhouse gas (GHG) emissions in many jurisdictions around the world. Taxes impose a fixed price on emissions, whereas under tradable permit schemes prices emerge in the...

Carbon taxes are a prominent policy instrument for decreasing the consumption of CO2-intensive goods in order to reduce the negative external effects involved in the production or consumption of such goods. A tax leads to higher consumer prices, which typically lowers consumption. However, in...