A clean innovation comparison between carbon tax and cap-and-trade system

By You-hua Chen, Chan Wang, Pu-yan Nie, Zi-rui Chen. 2020

127 citations recorded by the source corpus.

Abstract Both carbon tax and cap-and-trade systems are widely applied to reduce emission. This article compares the clean innovation effects of carbon tax with cap-and-trade systems by a static optimal model. Firstly, both cap-and-trade system and carbon tax stimulates clean innovation and reduce emission. Secondly, cap-and-trade system is more efficient to reduce emission and to promote clean innovation than carbon tax. Finally, firms undertake a loss under carbon tax, while the effects of cap-and-trade system on firms' profits are uncertain, which depends on the carbon cap. In summary, this article supports cap-and-trade system to cope with global climate change, but the regulator should choose the suitable emission cap and carbon trading price to guarantee the efficiency of cap-and-trade system. So, different purposes match with different carbon emission tax policies.

Subfields: Economics and Econometrics, Renewable Energy, Sustainability and the Environment

View Paper: https://www.semanticscholar.org/paper/bd4e63ce82e7a0ef82dd0da7dad0547d4359cd67