Query: Economic assessments of proposed policy to put a price on carbon emissions are in widespread agreement that the net economic impact will be minor.

Relevant passages:
Carbon tax <=SEP=> A carbon tax is a tax levied on the carbon content of fuels . It is a form of carbon pricing . Carbon is present in every hydrocarbon fuel ( coal , petroleum , and natural gas ) and converted to carbon dioxide and other products when combusted . In contrast , non-combustion energy sources -- wind , sunlight , geothermal , hydropower , and nuclear -- do not convert hydrocarbons to . is a heat-trapping `` greenhouse '' gas which represents a negative externality on the climate system ( see scientific opinion on global warming ) . Since GHG emissions caused by the combustion of fossil fuels are closely related to the carbon content of the respective fuels , a tax on these emissions can be levied by taxing the carbon content of fossil fuels at any point in the product cycle of the fuel .   Carbon tax offers social and economic benefits . It is a tax that increases revenue without significantly altering the economy while simultaneously promoting objectives of climate change policy . The objective of a carbon tax is to reduce the harmful and unfavorable levels of carbon dioxide emissions , thereby decelerating climate change and its negative effects on the environment and human health .   Carbon taxes offer a potentially cost-effective means of reducing greenhouse gas emissions . From an economic perspective , carbon taxes are a type of Pigovian tax . They help to address the problem of emitters of greenhouse gases not facing the full social cost of their actions . Carbon taxes can be a regressive tax , in that they may directly or indirectly affect low-income groups disproportionately . The regressive impact of carbon taxes could be addressed by using tax revenues to favour low-income groups .   A number of countries have implemented carbon taxes or energy taxes that are related to carbon content . Most environmentally related taxes with implications for greenhouse gas emissions in OECD countries are levied on energy products and motor vehicles , rather than on emissions directly .   Opposition to increased environmental regulation such as carbon taxes often centers on concerns that firms might relocate and/or people might lose their jobs . It has been argued , however , that carbon taxes are more efficient than direct regulation and may even lead to higher employment ( see footnotes ) . Many large users of carbon resources in electricity generation , such as the United States , Russia , and China , are resisting carbon taxation .

Climate change mitigation <=SEP=> Climate change mitigation consists of actions to limit the magnitude or rate of long-term climate change . Climate change mitigation generally involves reductions in human ( anthropogenic ) emissions of greenhouse gases ( GHGs ) . Mitigation may also be achieved by increasing the capacity of carbon sinks , e.g. , through reforestation . Mitigation policies can substantially reduce the risks associated with human-induced global warming .   According to the IPCC 's 2014 assessment report , `` Mitigation is a public good ; climate change is a case of the ` tragedy of the commons . Effective climate change mitigation will not be achieved if each agent ( individual , institution or country ) acts independently in its own selfish interest ( see international cooperation and emissions trading ) , suggesting the need for collective action . Some adaptation actions , on the other hand , have characteristics of a private good as benefits of actions may accrue more directly to the individuals , regions , or countries that undertake them , at least in the short term . Nevertheless , financing such adaptive activities remains an issue , particularly for poor individuals and countries . ''   Examples of mitigation include phasing out fossil fuels by switching to low-carbon energy sources , such as renewable and nuclear energy , and expanding forests and other `` sinks '' to remove greater amounts of carbon dioxide from the atmosphere . Energy efficiency may also play a role , for example , through improving the insulation of buildings . Another approach to climate change mitigation is climate engineering .   Most countries are parties to the United Nations Framework Convention on Climate Change ( UNFCCC ) . The ultimate objective of the UNFCCC is to stabilize atmospheric concentrations of GHGs at a level that would prevent dangerous human interference of the climate system . Scientific analysis can provide information on the impacts of climate change , but deciding which impacts are dangerous requires value judgments .   In 2010 , Parties to the UNFCCC agreed that future global warming should be limited to below 2.0 ° C ( 3.6 ° F ) relative to the pre-industrial level . With the Paris Agreement of 2015 this was confirmed , but was revised with a new target laying down `` parties will do the best '' to achieve warming below 1.5 ° C . The current trajectory of global greenhouse gas emissions does not appear to be consistent with limiting global warming to below 1.5 or 2 ° C . Other mitigation policies have been proposed , some of which are more stringent or modest than the 2 ° C limit .

Emissions trading <=SEP=> Emissions trading or cap and trade is a government-mandated , market-based approach to controlling pollution by providing economic incentives for achieving reductions in the emissions of pollutants . In contrast to command-and-control environmental regulations such as best available technology ( BAT ) standards and government subsidies , cap and trade ( CAT ) schemes are a type of flexible environmental regulation that allows organizations to decide how best to meet policy targets . Various countries , states and groups of companies have adopted such trading systems , notably for mitigating climate change .   A central authority ( usually a governmental body ) allocates or sells a limited number of permits to discharge specific quantities of a specific pollutant per time period . Polluters are required to hold permits in amount equal to their emissions . Polluters that want to increase their emissions must buy permits from others willing to sell them . Financial derivatives of permits can also be traded on secondary markets .   In theory , polluters who can reduce emissions most cheaply will do so , achieving the emission reduction at the lowest cost to society . Cap and trade is meant to provide the private sector with the flexibility required to reduce emissions while stimulating technological innovation and economic growth .   There are active trading programs in several air pollutants . For greenhouse gases , which cause climate change , permit units are often called carbon credits . The largest greenhouse gases trading program is the European Union Emission Trading Scheme , which trades primarily in European Union Allowances ( EUAs ) ; the Californian scheme trades in California Carbon Allowances , the New Zealand scheme in New Zealand Units and the Australian scheme in Australian Units . The United States has a national market to reduce acid rain and several regional markets in nitrogen oxides .

Stern Review <=SEP=> The Stern Review on the Economics of Climate Change is a 700-page report released for the Government of the United Kingdom on 30 October 2006 by economist Nicholas Stern , chair of the Grantham Research Institute on Climate Change and the Environment at the London School of Economics ( LSE ) and also chair of the Centre for Climate Change Economics and Policy ( CCCEP ) at Leeds University and LSE . The report discusses the effect of global warming on the world economy . Although not the first economic report on climate change , it is significant as the largest and most widely known and discussed report of its kind .   The Review states that climate change is the greatest and widest-ranging market failure ever seen , presenting a unique challenge for economics . The Review provides prescriptions including environmental taxes to minimise the economic and social disruptions . The Stern Review 's main conclusion is that the benefits of strong , early action on climate change far outweigh the costs of not acting . The Review points to the potential impacts of climate change on water resources , food production , health , and the environment . According to the Review , without action , the overall costs of climate change will be equivalent to losing at least 5 % of global gross domestic product ( GDP ) each year , now and forever . Including a wider range of risks and impacts could increase this to 20 % of GDP or more , also indefinitely . Stern believes that 5 -- 6 degrees of temperature increase is `` a real possibility . ''   The Review proposes that one percent of global GDP per annum is required to be invested to avoid the worst effects of climate change . In June 2008 , Stern increased the estimate for the annual cost of achieving stabilisation between 500 and 550 ppm CO2e to 2 % of GDP to account for faster than expected climate change .   There has been a mixed reaction to the Stern Review from economists . Several economists have been critical of the Review , for example , a paper by Byatt et al. ( 2006 ) describes the Review as `` deeply flawed '' . Some economists ( such as Brad DeLong and John Quiggin ) have supported the Review . Others have criticised aspects of Review 's analysis , but argued that some of its conclusions might still be justified based on other grounds , e.g. , see papers by Martin Weitzman ( 2007 ) and Dieter Helm ( 2008 ) .