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Emitting CO2 affects Earths energy balance and therefore the climate.The implied effects on the economy are highly diverse and very uncertain.Also the costs and benefits of reducing emissions are uncertain.Devising a policy under such high degree of uncertainty is complicated.In theory,an externality like that of CO2 emissions can be dealt with either by a tax or by emission quotas.In practice,finding the optimal tax requires less information than setting the optimal emission quota and is therefore a more efficient way of dealing with the uncertainty associated with climate change.