This Paper considers the design of a tax on greenhouse gases (“GHGs”). The purpose of such a tax, which we will generally refer to as a carbon tax, is to internalize externalities associated with anthropogenic cli- mate change.1  Without a carbon tax, individuals face a distorted set of prices. Activities that result in carbon emissions are relatively too cheap because individuals will not consider the costs the emissions impose on others, including on future generations. A tax forces individuals to consider the full set of consequences from emissions.