Carbon taxes/emission permits

Similarly to other environmental taxes, carbon taxes are defined as priced-based policy instruments for the correlated effects to increase the price of certain goods and services, thereby decreasing the quantity demanded. On the other side, tradable permits are defined as quantity-based environmental policy instrument. Although both policy instruments are MB, their implementation is different carbon taxes fix the marginal cost for carbon emissions and allow quantities emitted to adjust, whereas tradable permits fix the total amount of carbon emitted and allow price levels to change according to market forces. 

A carbon tax would offer a broader scope for emission reductions [10]. A system of tradable permits entails significant transaction costs, which include search costs, such as fees paid to brokers or exchange institutions to find trading partners negotiating costs approval costs and insurance costs. Conversely, taxes involve little transaction cost over all stages of their lifetime. 

Carbon taxes are dynamic economic instruments that offer a continuum incentive to reduce emissions. In fact, technological and procedural improvements and their subsequent efficient diffusion lead to reductions in tax payment. In addition, trading systems are able to self-adjust because emission goals will be easier to meet there will be a decrease in permits demand and in their price but not as rapidly as taxes. 

So long as petroleum is still widely available, it is difficult to forecast which of the various HEV options will prove to be most successful over the next decade or two. Indeed, fuel-cell enthusiasts consider both diesel and hybrid vehicles to be merely an interim technology until the day when FCVs are mass produced. Others are more sceptical over the future for FCVs and favour hybrids. Yet others see the hybrid as an expensive option with a performance that does not fully match that of a petrol engine. At present, it is impossible to say which view is correct the market will decide in the light of factors such as the extent to which hybrid technology progresses, the resulting vehicle prices, the future availability and cost of petroleum, and the possible imposition of carbon taxes or emission permits. 

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