Certainty and Uncertainty in Cap and Trade System or in Carbon Tax for Green Accounting to Decrease Greenhouse gas Emissions

This paper analyzes the price or quantity controls of greenhouse gases in the presence of uncertain costs. The greenhouse gases are a stock pollutant in the environment. Hence, the marginal benefit curve must be relatively flat which indicates to establish the preference of a price control over a quantity control. In the case of permanent shocks, the traditional comparison of marginal benefits versus marginal costs cannot be measured accurately. The choice between quantity and price controls becomes ambiguous and depends upon a more difficult measurement of marginal costs and benefits. The aim of the paper is to impose taxes to reduce greenhouse gas emissions.