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Carbon tax or carbon market ?

To cut greenhouse gases emissions, there is two economically interesting solutions: the carbon tax and the carbon market.

The carbon tax : a price is given for carbon emissions measured in every metric ton of CO2. Such a tax enters into French law in 2014, in the form of a carbon component rather than a full-blown tax and is part of domestic consumption taxes.

The carbon market : emission permits are distributed or sold to businesses, therefore establishing an emission quota that must not be exceeded. If a business emits less CO2 than its quota allows, it may sell this difference on the market to a business that has exceeded its own quota. Emissions are reduced due to two measures implemented in this system: the number of permits decreases in amount over time, and the price of these permits increases. There is an European carbon market.

By Aurore Basiuk

Aurore Basiuk

AMSE, Aix-Marseille Université

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Thomas Seegmuller

Thomas Seegmuller

AMSE, CNRS

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Julien Hanoteau

Julien Hanoteau

AMSE, Aix-Marseille Université, KEDGE Business School

Worldwide, 41 countries are responsible for 80% of global carbon missions. The average price of a tone of carbon in those countries is half as much as the environmental cost of carbon. In France, the price of one tone of carbon rose from 5 € in 2014 to 40 € in 2019.

In France, public policies are financed by state. Public funds come from taxes and public debt.

Some countries have a carbon market. Firms get (or buy) emission permits. The firms than pollute less than what they are allowed to can sell the surplus to those polluting more.

The more polluting province in Canada is Alberta.