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Choosing pollution control instrument is an important environmental policy decision. Carbon taxes and subsidies for emissions reductions are two commonly used environmental policies. In practice, the government may be restricted to use only one policy instrument. In this paper, we compare the social welfare effect between policies of a carbon tax and a subsidy. We show that as the marginal environmental damage of the high carbon product increases, the control instrument should change from a subsidy policy to a carbon tax policy. It also
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