Policymakers and economists have considered a number of different policies to reduce carbon
emissions, including a carbon tax, a cap-and-trade permit system, a subsidy for the purchase or use of
low-carbon vehicle technology, a renewable fuel standard, and mandates on manufacturers to increase
the average fuel efficiency of the cars they sell. In this paper, we address issues in the use of these
instruments separately or together. We consider the conditions under which policy makers should
consider each such policy, and we show how the stringency of one such policy must depend upon the
extent to which other such policies are already employed.
