Carbon Market or Carbon Tax: Which Is the Superior Climate Policy Instrument?

Increasing human-caused carbon dioxide emissions into the atmosphere, as spawned by the Industrial Revolution that begain during the mid-1800s, is widely recognized today as causing global warming leading to significant climate change that, in turn, causes significant upheaval in the patterns of economic and social activity among global citizens.  Section 1 describes the comprehensive evidence of this climate change scenario that is provided by the global science community.  Section 2, in turn, analyzes the economic and political dimensions of policy efforts for dealing with such carbon-induced climate change on a global basis.  Two primary economic policy instruments -- "carbon markets" and "carbon taxes" -- are identified in Section 3 as the primary alternative means of reducing global carbon emissions.  The relative advantages and disadvantages of these "carbon market" and "carbon tax" policy mechanisms are evaluated in Section 4.  The paper concludes, in Section 5, with an endorsement of the carbon tax as the superior instrument, though present global attitudes appear to be more supportive of the carbon market alternative.  The feasibility of a "hybrid" policy approach utilizing a combination of both carbon markets and carbon taxes is considered.  The analytical foundation of the paper consists of an interface between public economics, microeconomics, environmental economics, and international law.  The analysis of the paper is supplemented by relevant data, the role of international treaties, and other relevant facets of the contemporary global discussion relating to the critical issue of excess carbon dioxide emissions, climate change, and the resulting worldwide industrial and social displacements caused by these phenomena.