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The cost of carbon

Carbon trading is an attractive idea, but it will not work as well as a consistent tax on carbon emissions

By Richard Barry   July 2007

Efforts to control emissions of carbon dioxide in Britain are in a muddle. Until we sort this out, it will be needlessly difficult to meet our national goal of a 60 per cent cut in emissions by 2050.

Almost everybody accepts that a financial penalty must be attached to CO2 emissions, because mere exhortation is not proving to be enough. There are two main ways of attaching that penalty: the direct way, through taxation, where the emitter pays a tax for each tonne of CO2 emitted, and the indirect way—the so-called “cap and trade” approach.

Under a cap and trade…

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