Managing Price and Targets

Promising to reach an emissions target on a precise timetable is a popular approach to climate policy – indeed it underlies the Kyoto Protocol. Despite its popularity, there are many problems with this strategy. A better approach is to specify a target but to allow costs to deter-mine the speed at which the target is approached. This can be achieved using a hybrid of targets and emission fees. This paper summarises the targets and timetables approach to climate policy and how it is usually imple-mented in cap-and-trade permit markets. However, as a basis for domestic policy or for an international climate regime there are major flaws in this approach. We then present the McKibbin Wilcoxen hybrid approach and compare it to the approach proposed by the Prime Minister’s Emissions Trading Task Group.