There has been 642-587 longstanding debate on the relative merits of price versus quantity instruments to achieve emission reductions.
* An emission cap and permit trading system is a quantity instrument because it fixes the overall emission level (quantity) and allows the price to vary. One problem with 642-812 the cap and trade system is the uncertainty of the cost of compliance as the price of a permit is not known in advance and will vary over time according to market conditions.
* In contrast, an emission tax is a price instrument because it fixes the price while the emission 642-845 level is allowed to vary according to economic activity. A major drawback of an emission tax is that the environmental outcome (e.g. the amount of emissions) is not guaranteed.
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