The goal of this article is to formulate some proposals to reduce CO2 emissions with efficient and effective policies. After presenting three possible ways that countries can follow to define their policies for combating climate change, the article discusses the tools available to implement these policies. It then reviews the reasons why it would be preferable to set centrally the carbon price rather than limit the amount of emissions and let the market setting the price. On the basis of these considerations some concrete proposals for the policy of combating climate change in Italy and the EU are formulated. It is proposed that Italy re-introduces a carbon tax, called "climate contribution" and defines its evolution in a coordinated manner with the price of ETS emission permits. To make prices of the permits more stable and predictable, it is proposed to reform of the EU ETS by introducing a floor price rather than a market stability reserve. In addition to make the European climate policy more effective and rational, it is proposed that the floor price of emission permits is fixed in such a way that within a decade it is no longer convenient to use coal in electricity production (unless in this period the carbon capture and storage becomes competitive).
Keywords: International climate policy, climate change, carbon tax, prices versus quantities, EU ETS
Jel Code: Q54, Q58, Q48, H23, H41