Here, from energy economist Robert Lyman, a discussion of the recent announcement of a “cap and trade” arrangement for Ontario.
Various politicians and academics in Canada have recently called for the introduction of a carbon tax as a means of stimulating a reduction in greenhouses gas emissions. This is welcome news to provincial governments like that of Kathleen Wynne in Ontario that are desperate for new sources of funds. The central arguments for a carbon tax, in terms of economic theory, are that such a tax would create a price disincentive affecting the use of all fossil fuels sources of energy (i.e., oil products, coal, and natural gas) and that it would be more even-handed and economically efficient than the current complex system of subsidies, incentives, and regulatory mandates that are now used in almost every sector of the economy to discourage fossil fuel consumption and emissions.
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