Reflections--Carbon Pricing in Practice<xref ref-type="fn" rid="ret008-FN8">*</xref>

Carbon pricing is a broad term that encompasses two policy approaches: emissions trading and carbon taxation. Emissions trading places a cap on the aggregate emission level and allows the market to determine the price, whereas carbon taxation sets the price and allows the market to determine the aggregate level of emissions. Although programs to address climate change based on pricing carbon are relatively new, programs to price pollution more generally are not. Various forms of emissions trading and pollution fees (or taxes) have been around for some time. Existing carbon pricing programs provide a wealth of experience from which we can draw insights about the effectiveness of particular design options and how and why context can be important. This "Reflections" reviews these operating programs and identifies some of the chief lessons from this experience. (JEL: Q53, Q58) Copyright 2013, Oxford University Press.