Two approaches to pricing pollution

This report compares the Cap and Trade method with an alternative method, the Flexible Fee Mechanism. The Flexible Fee Mechanism was created as a response to political and other practical obstacles often preventing the efficient application of other methods.

The main focus of the Flexible Fee Mechanism is the levying of a fee at the point where a pollution-inducing product enters the economy. The fee is then raised sufficiently (and sufficiently often) to effectively stimulate the transformation of the economy in a sustainable direction. At the same time, the revenue from the fee is directed back into the economy to stimulate alternatives, demand and employment.

Still, key questions remain unanswered in this report. This project was launched by the Working Group for SCP (HKP) in collaboration with the Working Group on Environment and Economy (MEG) under the Nordic Council of Ministers.