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Economic Brief

October 2009, No. 09-10

The Case for Direct Methods to Address CO2 Emissions and Other Negative Environmental Externalities

Kartik B. Athreya and Renee Haltom

Existing policies to reduce emissions of carbon dioxide (CO2) largely have been structured to subsidize alternative energy technologies. Yet these policies are likely not to be as useful as ones that target CO2 emissions directly, such as an emissions tax or a "cap and trade" program.

Additional Resources

Mankiw, N. Gregory. "Smart Taxes: An Open Invitation to Join the Pigou Club." Based on a talk presented at the Eastern Economic Association, March 8, 2008.

Metcalf, Gilbert E. "Tax Policies for Low-Carbon Technologies." Working Paper No. 15054, National Bureau of Economic Research, June 2009. (For an abridged version of Metcalf's paper, see his column written for

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