A Tax-Based Approach to Slowing Global Climate Change

Joseph E. Aldy Eduardo Ley I an W.H. Parry Abstract In this paper, we discuss the design of carbon dioxide (CO2) taxes at the domestic and international level and the choice of taxes versus a cap-and-trade system. A strong case can be made 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…