Cap And Trade Vs Carbon Tax Essay

The issue of carbon emissions is an important one not only from an environmental perspective but also an economic one. While reducing carbon emissions is an important one for the health of human beings as well as that of the environment, the larger question is what type of policy strategy is best for both reducing such emissions which might have an impact on efforts to mitigate the effects of pollution on climate change. While ther are options to consider which does not rely on economics-- technological or output standards achieved by command and control regulations--they are often fraught with political resistance by industry because they do not allow industry to make any choices or play a role in solving the problem of

Cap-and-trade is environmentally and economically approach to capping and controlling greenhouse gas emissions which is the primary cause of global warming. It is a policy move aimed at controlling large amounts of gas emissions from a cluster of sources. This approach sets an overall cap which is the maximum amount of gas emissions per a stipulated compliance period, for all the sources under that particular program.

A cap-and-trade program sets a maximum level of pollution, and distributes emission permits among firms that produce emissions (Carbon Tax, 2013). The purpose of which is regulation of specific emissions by stationary and mobile sources, and setting a specific level which all emitters are re-quired to meet. Cap-and-trade possibly has less of a direct economic component to it than the other alternatives to reducing emissions described due to the ability to trade permits versus the expendi-ture of resources improving technology, with some arguing it is to the detriment of the environment. As stated in the article found in Reclaiming the Environmental Agenda, by Ashford, N. et al., 2008, “being a market-based instrument, ‘the cap-and-trade option suggests that at least this form of MBI may be more environmentally effective than the usual command-and-control alternatives, in addition to being more economically efficient.” (Ashford, N. and Caldart, C., 2008, p. 908).

The cap on the market is set on carbon emissions, creating scarcity within the market. At the end of each year businesses within the scheme are required to ensure they have enough allowances to account for their installation’s actual emissions. Those firms that do not comply and pollute without sufficient permits are hit with heavy fines. (Euro 100 per ton). The aim of carbon trading is to create a market in pollution permits and put a price on carbon. In this way, policy can help internalise external costs of firms’ production and encourage lower emissions to tackle climate change. In a cap and trade system, the volume permits would gradually decline and total emissions, in theory, will diminish. The model of such can be shown as

There are many advantages and disadvantages when it comes to any system in regards to reducing the greenhouse gas emissions. If there is a legislation that seems like environmentally would be best, most likely it comes with a cost that sometimes may seem unsustainable. Just the same, there are advantages and disadvantages to the cap-and-trade system. As Steve Richey writes in his ‘Pros and Cons of Cap and Trade’ article. The major draw toward this program is its efficiency. Companies are able to reduce their emissions at a low cost, and sell emissions credits to companies who cannot. A certain number of credits are made available to purchase. This allows the option for environmentalist to purchase the credits and retire them, therefore decreasing the harmful effects of climate change. The disadvantages to the cap-and-trade system are that larger companies drawn to use coal, oil and gas have less of an incentive to switch to using

Stephane Dion (2007) published a summary of the liberal party’s proposal intended to decrease the carbon emissions in Canada. The liberal party suggested making the carbon emissions reduction not only a governmental concern but also the businesses need to get involved. This proposal recommended having a targeted goal so that all the businesses can be on the same page. The industries that would respect these new regulations and reduce their carbon emissions would be recognized and those that do not would be penalized. The party believed that the long-term positive effects outweigh socially and economically the negative impacts. The liberal party was certain that this new plan took into account the human lives threaten by climate change. Reading this article, the question that arose is: would this plan affect the economy of the country if applied?

Cap & Trade vs. Carbon Taxes – Which system can impact CO2 emissions the most?

Climate change is becoming a major issue in Canada and in order to reduce the impact global emission needs usage to start dropping as soon as possible. Therefore, a carbon tax levy has been recently implemented in Alberta. The tax is based on greenhouse gas emission caused from burning fossil fuels. The main reason the province is enforcing Carbon tax is to potentially reduce emission which will develope a change in our climate. B.C has implemented the Carbon tax levy since 2008, and has seen a positive outcome thus far.

Prime Minister Justin Trudeau took the nation by surprise in October 2016 by stating that each province in Canada will need to adopt a carbon pricing scheme by 2018. In addition, Trudeau added that the only other option for the provincial governments will be to impose a cap and trade system in order to follow the Paris Agreement. Countries that follow the agreement must set their own targets for reducing the carbon gases that they emit into the atmosphere. The main goal is to sustain global warming to be under two degrees Celsius. (Paris Agreement Paragraph 2). Revenues made off of the carbon tax will remain with the provinces and territories of origin. With this taxpayer money, each provincial government can decide how the tariffs are distributed.

Climate change has been an increasing concern in today’s world and has proven to be detrimental in the coming years. With the increasing human population, the consumption of fossil fuels has been in high demand and this poses a threat in the future. After several years of political and cultural pressure to take a stand on climate change and in order to control the regulation of carbon dioxide emissions into the atmosphere, British Columbia implemented the carbon tax on July 1, 2008 (Murray and Rivers, page 3). This tax was the first to be imposed in North America and was revenue-neutral (Murray and Rivers, page 3). Due to its myriad of benefits, the carbon tax was favored by many and did has not disappointed; not only have greenhouse gas emissions dropped, but business have grown tremendously, and other energy sectors are flourishing. While counter arguments may highlight the negative effects of the taxation policy, rebuttals often overlook the long-term advantages. In this paper, I will prove that the carbon tax policy in British Columbia has had several beneficial outcomes such as the reduction of greenhouse gases and economic growth. I will then raise an opposition to my thesis by arguing that the short-term economic effects will be damaging to the lower-income classes. However, I will show that this objection is not as valid because the long-term benefits, both economically and environmentally will ultimately prove integral in the alleviating future climate change.

Tremendous amounts of carbon dioxide are released into the atmosphere every day and the consequence is the destabilization of Earth’s climate and damage to existing and endangered ecosystems. In order to avoid these ramifications, carbon emissions must be reduced. Industrial nations like the United States rely heavily on the burning of billions of tons of fossil fuels, such as coal, oil and natural gas, as their primary source of energy generation. Unfortunately, this has led to the United States being one of the top leaders in carbon emissions in the world along with India and China (Woodard, 2007, pg. 27). A proposed solution that has already been implemented in several nations is the carbon tax (CO2 tax), which puts a price on and taxes the carbon dioxide emitted from the burning of fossil fuels and makes polluters pay the price for the emission of their negative externalities into the environment. As fuel follows through with the combustion process, carbon dioxide is released into the atmosphere where it remains. The carbon dioxide traps the heat in the Earth’s atmosphere leading to a rise in global warming and climate change (Carbon Tax Center, 2016a, What’s a Carbon Tax section, para. 2). A carbon tax can quickly and easily be implemented by the United States federal government and has the potential to conserve the environment by reducing carbon emissions,

According to the case, the carbon-tax and a cap-and-trade system are the best economic tool to employ to reduce emissions. As we know, taxes are the most important expense for a company or firm, if they would emit much more carbon dioxide and other gases, they need to pay more taxes on using carbon recourses. It is stated (Bubna-Litic & Chalifour 2012) that ‘One of the defining features of carbon taxes is that they generate a relatively clear and predictable stream of revenue’. The revenue can be used in many different ways and a key issue is how

Government enacted solutions are probably the most effective ways to reduce carbon emissions and to control pollution since unfortunately the majority of individuals mainly act to their own self-interest and are not concerned with the future of the planet. This is a prime example of the tragedy of the commons, which is the exploitation of a common resource. In this case the common resource is the atmosphere. The first method proposed is the carbon cap trade system. The term cap means the limit or the maximum of the amount of pollutant to be emitted. A trade refers to the transfer of permits that have to be bought by firms that need to increase their volume of emissions from firms that require fewer permits 1. The carbon tax method is a tax on the carbon content of fuels — effectively a tax on the carbon dioxide emissions from burning fossil fuels 2. So, which system would be best for the government to enact to reduce carbon emissions in the atmosphere?

Though the term 'cap-and-trade ' is mostly referred to efforts in reducing carbon emission, the initial idea of trading emissions was applied to SO2 emission control. During Regan administration from 1980 to 1988, 70 bills were written to address SO2 emission and acid rain control. However, such 'command-and-control ' policy was too costly to operate. It was not until 1989 the government proposed emission trading as a means of reducing SO2 emissions2. Cap-and-trade officially became part of Clean Air Act 19903. The result from this very first cap-and-trade initiative was very encouraging-3 million tons of acid rain emissions have been cut. With the recognition of climate change, cap-and-trade was proposed to be a solution to dealing with carbon emission.

In February 2011, the Australian federal government declared a scheme to implement a Carbon Tax from July 1, 2012. Implementing this scheme has generated a controversial debate between Australians. The term “Carbon tax” refers to an environmental tax forcing polluters to pay per ton of carbon which they release into the atmosphere. This essay will provide the economical, social and political implication of carbon taxes, also with its introduction who will benefit and who would suffer.