The complementary environmentally related taxes and Emissions Trading System: Lessons from EU countries

This paper reveals the two important market-based policy instruments-environmentally related taxes and Emissions Trading System (ETS) - for government to confront climate change. It utilizes the experience of EU countries to uncover the similarities and differences between theory and practice. The key findings include, first, there are no strong connections could be seen between the two policy instruments in the EU countries, and to establish complementary relationship between these two instruments is the key point in the future. Furthermore, in comparison with the environmentally related taxes, ETS might have more space to develop all over the world. Moreover, many EU countries´ experiences are valuable resources for other countries in policy making. Finally, both these two policy instruments are cost-effective way to reduce the emissions and they should be used complementarily without overlapping.