The competitive effects of carbon taxes can be ameliorated with border tariffs and rebates. An interesting innovation in reducing the costs of sulfur dioxide and Nox emissions in the United States has been to provide for emission trading rights. Polluters may accumulate trading rights by reducing their emissions below adopted standards and then sell these rights to other polluters for whom pollution reduction is more expensive. The advantage of emission trading rights over pollution tax is that the pollution cap underlying trading rights assures specified carbon dioxide emission reductions, whereas the effects on emissions of taxes is somewhat speculative. The Norwegian government therefore has just decided to consider replacing its carbon tax, which has not resulted in sufficient carbon reduction to meet its goals, with an emissions cap and emission trading rights.
Some environmental groups object to the grant of a legal right to pollute.
International emission trading rights for carbon dioxide are now being debated as a means of reducing the costs of climate change measures in the Kyoto Protocol conferences of the parties' implementation negotiations. While long-term subsidization of any fuel, technology or product distorts the market and is therefore theoretically undesirable, temporary subsidies to bring new technologies into the marketplace can be effective, useful, and often essential to accelerate their market acceptance. Also, where fossil fuel subsidies persist, non-fossil fuel subsidies are justifiable to level the playing field for them. A good example of effective use of such temporary incentives is found in Denmark's introduction of wind power. Consumers now pay less for wind power than for power from coal.