freediver wrote on Oct 19
th, 2017 at 9:42pm:
I agree with DNA. A fixed carbon price makes far more sense. Otherwise the price will fluctuate wildly, which is not exactly great for encouraging long term investment in emissions reduction.
You need to look deeper.
If the carbon price will "fluctuate wildly", what is the cause of this fluctuation? The most likely cause: global economic activity (if the price is linked to the global market). The price would be generally higher when the global economy is strong, and lower when the global economy is weak. Either way, it would act to moderate the global economy. A fixed price cannot do that.
Short-term fluctuations will also exist, but these would be inconsequential. The prices of all kinds of commodities fluctuate a lot too, do these short-term fluctuations discourage investment? No, of course not.
Over the longer term, the price may be at levels perceived by governments to be too low or too high. It is likely that governments, central banks and other similar organisations may intervene as needed to stabilise the price as they already do with currencies.