policymakers demonstrate

300 Paul Ekins, Paul Drummond, and Jim Watson
towards higher efficiency, lower emissions and resource consumption, and
greater resilience, and may include training and education campaigns, labelling
and certification, public reporting and other information disclosure and transparency
measures. All act to provide consumers and investors with information
surrounding environmental performance of a product, service, process or organization
at the point of use, or across the product lifecycle or organizational
operations and supply chain, in order to make informed decisions regarding
investments, purchases and other behaviour.
7.5.3 Markets and Pricing
Carbon Pricing
Perhaps the most commonly suggested policy prescription to address climate
change is carbon pricing, whether through carbon taxes, tradable permits, or
some combination of the two. Contrary to many perceptions, this is a prescription
that has actually been implemented in a number of countries. Globally, 40
national and over 20 subnational jurisdictions have implemented carbon pricing,
representing almost a quarter of global GHG emissions (with a value of
around US $50 billion in 2015) (World Bank, 2015). Goulder and Schein (2013)
conducted an assessment of the relative advantages and disadvantages of carbon
taxes and emission trading systems. On a number of grounds carbon taxes seem
to be preferred, one of the most important of which is that additional climate
change mitigation policies do not reduce emissions in a cap-and-trade system
(unless the cap is adjusted downwards, which then undermines the principal
feature of an emissions trading system, which is that it gives assurance over
the quantity of emissions), whereas under a carbon tax additional policies do
reduce emissions further. This is an important consideration when policy mixes
are employed. However, there are political advantages to emission trading systems,
such as the ability to allocate emissions permits for free, which have led
to them being introduced more frequently than carbon taxes, despite the theoretical
advantages of the latter.
Environmental Tax Reform
The introduction of carbon pricing (or other environmental pricing instruments)
may be part of an environmental (or ecological) tax reform (ETR), which is the
shifting of taxation from ‘goods’ (like income, profits) to ‘bads’ (like resource
use and pollution). ETR is often implemented, and is normally modelled, to
be revenue-neutral (i.e., taxes on labour or businesses are reduced in line with
the revenues from the environmental taxes, such that there is no change in the
overall fiscal balance). The basic hypothesis of ETR is that it can lead to higher
human well-being (or welfare) both by improving the environment, and by
increasing output and employment, and potentially also by stimulating green