The costs of establishing and administering a cap-and-trade system could be substantial. It demands that a cap be set, monitored, and enforced. This is a highly complicated process, given the size of the energy market, and would demand substantial administrative oversight. Further, should the monitoring not be perfect, given the size and power of the firms involved, it is likely that they will be able to find loopholes in order to deal with the problem.  A carbon tax is predictable, as are most simple tax systems. A cap-and-trade system, on the other hand, is subject to market fluctuations, speculation, and volatility. This could have a bad effect on energy prices. Specifically, if the market becomes subject to speculative attack, it would be likely that energy companies would have to offset the risks in the market by raising energy prices. Further, such market volatility could lead to certain energy companies being unduly punished for changes in the market that they simply could not have predicted. [1]  [1] “Carbon Markets Create a Muddle.” Financial Times. 26/04/2007