Cap-and-Trade vs. carbon tax simulations

For a U.S. consortium of electric utilities, Brattle performed an evaluation of the merits of a cap-and-trade versus carbon tax approach to GHG pricing. The report considered the consequences of volatility in the price of emissions versus the uncertainty in quantity of realized emissions reduction that would result from the two different approaches. It also evaluated the effects of price uncertainty on likely willingness of power plant owners and environmental control developers to make long-term investments in new emissions control technologies, as well as effects on tax revenues available for redistribution to customers or generators with stranded costs.