Abstract: In response to the global climate changes, reducing carbon emissions has become a worldwide consensus and a “new normal state” of the world economy. This paper gives a detailed description of the two main policy tools for carbon reduction: the basic connotation, economic theoretical basis, advantages and disadvantages of the carbon tax and the carbon trading markets. Combined with China’s actual situation, this paper presents the policy recommendations that China should adopt the two carbon reduction policies to collect carbon taxes and to establish carbon trading markets, boost actively the international coordination and convergence of all kinds of carbon reduction policies, and race to control the commanding height of future economical and social development.

Key words: carbon reduction policies; carbon tax; carbon trading market