A Cap and Trade system or carrot works better than the Carbon Tax...or stick according to a study conducted in part by University of California Merced professor, Yihsu Chen.
Under Cap and Trade, permits that allow businesses to continue to emit carbon are sold on a permit market which is similar to the stock market. Chen, says because businesses can time when they purchase those permits, and when they invest in new technology, they can maximize profits. On the other hand, a tax just punishes businesses that emit too much carbon.
The study found a coal-powered business could convert to
natural gas under cap and trade for about 50 dollars a ton less
than it would cost to keep the plant coal-powered and pay a Carbon
Tax.
The study was co-authored by University of New South Wales'
professor, Chung-Li Tseng.