This article examines the consequences of a previously unnoticed difference between pollutant cap-and-trade and pollution taxes. Implementation of cap-and-trade relies on a forecast of future emissions, implementation of a pollution tax does not. Realistic policy designs using either regulatory...

The economic literature supports the case that an emissions excise tax is one of the most cost- effective approaches to reducing greenhouse gas (GHG) emissions. The United States Environmental Protection Agency (EPA) has begun the process of regulating GHG emissions under section 111(d) of the...