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As economist Nicholas Stern declared in his much-publicized report to the U.K. government in the fall of 2006, climate change is "the greatest and widest-ranging market failure ever seen." In order to address this global market failure, economists generally favour two possible policy responses. First, by setting an annual cap on global emissions and requiring emitters to purchase emissions credits either from a regulator or from other emitters, so-called emissions-trading regimes create a price for carbon emissions which creates market incentives for emitters to reduce their emissions and for individuals and enterprises to develop alternative low-carbon technologies. Alternatively, governments can set this price directly through a tax on carbon emissions or (as a close proxy for these emissions) on the carbon content of fossil fuels. Over the past 15 years, governments have experimented with each of these policy approaches.While the ultimate policy goal of capping annual emissions might suggest that an emissions-trading system is preferable to a tax regime, the enormous political challenges to the creation of a global trading system - exemplified by the limited success of the Kyoto Protocol - suggests that carbon taxation might be a more politically feasible strategy to encourage emission reductions over the short term. In addition, as the Stern Report explains, uncertainties about the social costs of carbon emissions and the costs of adaptation to climate change over time might also favour carbon taxation over emissions trading as an initial strategy to reduce GHG emissions. As well, uncertainty about the price for carbon emissions that might emerge under an emissions-trading regime has caused some sectors of the business community to favour a carbon tax which establishes a clear and certain price for emissions.The purpose of this paper is to inform the debate about carbon taxation in Canada and other developed countries by explaining the theoretical case for carbon taxation and reviewing the design and experience with carbon taxation in countries such as the Scandinavian countries and the United Kingdom. The paper should be approximately 40-60 double-spaced pages in length. ..PAT.-Unpublished Manuscript [ABSTRACT FROM AUTHOR]