98eef080_r_Climate_and_Energy_Solutions__Expansion
[Policy] Carbon Tax (on emissions or product) [Innovation] Yes - firms have incentive to innovate to reduce emissions and tax payments. May lead to substitution toward other goods and could lead to process efficiencies or new techniques with low carbon products. [Compliance Cost Certainty] Yes - the marginal cost of a unit of pollution is defined by the tax rate. [Environmental Certainty] No - with a fixed tax rate, actual emissions will vary depending on the cost of reducing emissions as determined by such factors as economic growth, technological progress, and changes in energy supply. [Linkability] Potentially harmonized with the tax rates of other governments, but may be politically contentious. Cannot be linked to trading programs to reduce compliance costs. [Revenue Recycling] Yes [Expansion] 
Potentially can be expanded to include additional sectors or regions as needed.
Market Mechanisms: Understanding the Options | Center for Climate and Energy Solutions
Expansion