A hybrid carbon tax and trading scheme

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A dramatic increase in low carbon investment is needed to avoid irreversible climate change - of the order of US$500 billion per year according to some estimates - and the UN expects that over 85% of this will come from the private sector. But the uncertainty and recent low prices seen in the carbon market are major barriers to gearing up investment.

This paper by PricewaterhouseCoopers LLP argues that a modified trading scheme would bring some of the advantages of price certainty provided by a carbon tax while also capturing both the potential political attractions of carbon trading schemes and the virtues of allowing some price flexibility in response to evolving economic and technological conditions.