a b s t r a c tA greenhouse gas emission trading system is considered an important policy measure for the deployment of CCS at large scale. However, more insights are needed whether such a trading system leads to a sufficient high CO 2 price and stable investment environment for CCS deployment. To gain more insights, we combined WorldScan, an applied general equilibrium model for global policy analysis, and MARKAL-NL-UU, a techno-economic energy bottom-up model of the Dutch power generation sector and CO 2 intensive industry. WorldScan results show that in 2020, CO 2 prices may vary between 20 h/tCO 2 in a GRAND COALITION scenario, in which all countries accept greenhouse gas targets from 2020, to 47 h/tCO 2 in an IMPASSE scenario, in which EU-27 continues its one-sided emission trading system without the possibility to use the Clean Development Mechanism. MARKAL-NL-UU model results show that an emission trading system in combination with uncertainty does not advance the application of CCS in an early stage, the rates at which different CO 2 abatement technologies (including CCS) develop are less crucial for introduction of CCS than the CO 2 price development, and the combination of biomass (co-)firing and CCS seems an important option to realise deep CO 2 emission reductions.

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This paper analyses how hybrid systems of carbon taxes and tradeable permits optimize some conflicting dimensions of political acceptability related to the design of these instruments. Pure systems like taxes without exemptions or auctioned tradeable permits cause problems for political acceptability in open economies due to high overall costs (abatement cost plus payments on the tax or auctions) for current polluters. Unfortunately, pure systems based on grandfathering of emission rights across the board do not provide a feasible alternative because of monitoring and enforcement problems. In contrast, consciously designed hybrid systems employ grandfathering of emission rights together with either carbon taxes or auctioned carbon permits in order to overcome acceptability problems of pure systems, while leaving incentives to reduce emissions at the margin untouched. Moreover, monitoring and enforcement costs of the hybrid systems are less due to the lower number of participating agents compared with the pure systems, while opportunities for costor burden-sharing exist as well. Copyright Kluwer Academic Publishers 1997carbon pollution credits, carbon taxes, environmental policy, externalities, hybrid instruments, tradeable carbon permits,

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In the European Union (EU) the discussions on climate policy have focused on the instrument of taxation. However, there has been considerable opposition from both Member States and industry against the combined carbodenergy tax proposals. In this article, an alternative market-oriented instrument for controlling CO 2 emissions is discussed which overcomes some of the disadvantages of the tax: tradable emission permits. Special regard is given to the functional design and practical implementation of a system of tradable carbon permits for the European Union. Furthermore, tradable carbon permits are compared with a carbon tax. Copyright 1995 BPL.