A carbon tax would be expected to be more effective in reducing emissions than an energy tax, as it more accurately internalizes the externality. To com- pare carbon and energy taxes, two scenarios were run, corresponding to the EC proposal of US$3/bbl in 1995 rising to US$10/bbl by 2002 (in real 1990 prices), but in the first scenario wholly raised on energy and the second wholly on the carbon content of the fuel