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New and old market-based instruments for climate change policy

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Abstract

We review and examine three market-based instruments to address the challenge of climate change: emission trading, emission taxes, and hybrid instruments. Our main contribution is the illustration and comparison of these instruments using recent results from theoretical research and practical policy experience. Hybrid policies that aim to combine taxes and permits emerge as a promising way forward. An additional contribution is that we also comment on two other related concepts, namely, innovation strategies and prediction markets. For the former, we show that, to make economic sense, the much publicized Asia-Pacific Partnership on Clean Development and Climate has to rely on the same basic tool as the other instruments, namely, relative prices. For the latter, we discuss how prediction markets can complement traditional scenario analysis by experts. They are likely to improve the practical implementation of all previously discussed methods.

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Authors and Affiliations

  1. Energieinstitut at the University of Linz, Altenberger Strasse 69, A-4040, Linz Auhof, Austria

    Sebastian R. Goers & Alexander F. Wagner

  2. Swiss Finance Institute, University of Zurich, Plattenstrasse 14, CH-8032, Zurich, Switzerland

    Alexander F. Wagner

  3. Energie AG Oberösterreich Trading GmbH, Böhmerwaldstrasse 3, A-4020, Linz, Austria

    Jürgen Wegmayr

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  1. Sebastian R. Goers
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  2. Alexander F. Wagner
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  3. Jürgen Wegmayr
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Goers, S.R., Wagner, A.F. & Wegmayr, J. New and old market-based instruments for climate change policy. Environ. Econ. Policy Stud. 12, 1–30 (2010). https://doi.org/10.1007/s10018-010-0161-x

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  • DOI: https://doi.org/10.1007/s10018-010-0161-x

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