Cap-And-Trade Vs Carbon Taxes

The government sets an industry-wide limit to carbon production. Corporations that produce more than the set carbon limit are able to buy allowances from corporations who produce below the allowed amount. This creates a market for carbon so that companies can actually make money by reducing their carbon output. As time progresses, the government will incrementally lower the cap, which will reduce the number of allowances issued and increase their price. Ontario's Climate Change Mitigation and Low-carbon Economy Act, 2016 (the "Climate Act"), creates a cap-and-trade system that covers 82 percent of Ontario's direct emissions. This system covers all fossil fuels (e.g., gasoline, diesel and natural gas) used in Ontario by individuals,

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.

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?

Andrew Moylan, a conservative who advocates free market and limited government, has argued that carbon tax is the less complex and better guarantee solution to carbon reduction; however, the main purpose of this paper is to rebut his argument and to present why Cap-and-Trade is a better solution compare to other solution in controlling variables, ensuring social justice and last expanding global regulation on carbon dioxide. In which how cap and trade can reduce carbon emission and save the earth from climate change becomes the fundamental question. Consisting passion on the environment more than economy, I construct my point of view base on a belief that all human beings feel connected to the environment and take responsibilities in regulating themselves, thus this paper reflects a macro level perspective. My central assumptions are that first, that the government or agency have already figured out the target setting in which encourages emission reduction but stimulates technological innovation. Secondly, the trading systems between corporations are transparent and honest. Last, I am also assuming that there can only be one solution to carbon reduction. As a result of dumping unlimited amounts of carbon pollution into the atmosphere, we have exceed planetary boundary, thus the government should immediately regulate and monitor carbon emission in order to prevent growing consequences of climate change. Through concepts such as technological hubris and Jevon’s paradox, I will

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.

Having a carbon tax will encourage further research and development of more efficient alternatives. With the extra cost of using fossil fuels, companies will look into alternative sources like solar and wind for their power needs. This tax will also be a monetary incentive on a local level to push consumers to look for alternatives. In turn, this lowers emissions, saves them money, and has a positive impact to the environment. The revenue collected from the tax could be directed to funding for those alternative energy sources. More funding means more opportunity to develop effective alternative sources, because today, fossil fuels are simply more powerful, effective, and reliable. Having options to other equally efficient and effective energy is good because depending on different regions; one source may be more

Firstly, it can effectively decrease the total amount of carbon emission by changing the behavior of numbers of carbon-based industries, especially when the price on emission is high enough. For example, according to the result from the case study for the effectiveness of implementing carbon pricing in Australia, “more reasonable emission reduction can be observed at the carbon price of above $46. In fact, increasing the carbon price to double its 2012 rate would result in about four times improvement in carbon emission”(Behnam,et,al, 2013). Putting it in another way, it is not hard to understand that the industries with imposed carbon tax will automatically switch the conventional way of generating energy from the combustion of fossil fuels to a more environmental friendly way in which taking advantage of cleaner renewable resources like wind, solar can reduce the amount of carbon if the cost of emitting greater greenhouse gases into the atmosphere is higher than the benefit of doing that. In addition, the carbon price will promote the potential development of clean technologies. For example, “a carbon price will lead to growing US demand for green technologies to reduce CO2 emission, which will incentivize greater levels of global R&D into such technologies”(Meltzer, 2014). To demonstrate, it is a noteworthy fact that more and more scientists will develop an increasing number of clean technologies if the fund collected from the carbon tax is financially sufficient enough to support for their researches. In effect, Lawrence & Koshy (2000) found that, “carbon taxes therefore provide a double dividend-internalizing the cost of the environmental harm from CO2 emission and producing green technologies through induced innovation”. Beside that, in the cap and trade system, the exchange of permit for carbon emission is not

Greenhouse gas regulation (GHG) is one of the ways that eases climate change while keeping Canadian economy. They must consider mitigating greenhouse emission under the condition of rising energy production and greenhouse gas consistently (Tarnoczi & Driver, 2014). In addition, Canada is a third largest oil reserves, as well as ninth largest emitter in the world and approximately 25% of greenhouse gas is attributed to transportation (Figures, 2015). Therefore, the effort of people is needed for significant reduction. Canadian governments try to achieve it through the stringent regulation for the transportation and electricity sectors (N.A, 2015). However, advantage and disadvantage for both people and industry exist at least. Forum (2013) indicates

In effort to limit emission a cap-and trade program is used "a market-based policy tool for protecting human health and environment by controlling large amounts of emissions from a group of sources"(Cap-and-Trade programs: Should Congress enact a Cap-and-trade program to limit carbon dioxide emissions?). The government would give out permits to allow companies to emit a certain amount of Carbon also letting these companies buy and sell emission permits. "a cap-and-trade program would make it more expensive for companies to emit CO2 advocates say companies would be more inclined to invest in clean, nonpolluting sources of energy"(Cap-and-Trade programs: Should Congress enact a Cap-and-trade program to limit carbon dioxide emissions?)

“There is one issue that will define the contours of this century more dramatically than any other, and that is the threat of a changing climate,” Barack Obama. As stated by Barack Obama, climate change is an immediate global threat that can no longer be ignored. Carbon dioxide accumulation in the atmosphere has lead to visible changes in global climate. Thus, the need to implement market mechanisms that encourage markets worldwide to reduce their emissions is essential. In order to maximize emission reductions, while minimizing social loss and other negative repercussions, market-based incentive policies are the most applicable options. These options include carbon taxation and cap and trade. Both options have faults, however they provide nations with the best available ways to combat climate change. Through theoretical and practical analysis, it is suggested that carbon taxation may be the preferred policy to impose.

The paper has thus fur discussed the implications of carbon pricing and its effects. Hence this section of the paper will take British Columbia’s carbon tax policy as a case study to understand the effects of a carbon tax on society as a whole and or the targeted industries. Since 2008, British Columbia has imposed a carbon tax, the first jurisdiction in North America to do so. The carbon tax system in British Columbia is designed as a revenue neutral, meaning every dollar generated by the tax is returned to British Columbians through reductions in other taxes. As a policy direction, the British Columbian provincial government has implemented income taxes cuts to compensate consumers who had to pay higher prices for gas and other services that are under subject to the carbon tax legislation.

According to Canada’s Emissions Trend report, the two provinces that contributed the most to the country’s emissions are the province of Alberta and Ontario. Alberta has suffered many first hand consequences of high GHG emissions, notably the massive wildfire in Fort McMurray, a fire that burned 85 000 hectares of land (MacCleans, n.d.). Ontario on the other hand faced a cooler and wetter summer for 2017. Due to the high contributions of emissions by Albert and Ontario, these provinces have high priorities to establish legislation and policies to reduce emissions. However, they have enacted multiple provincial legislation targeting environmentally sustainable

It will set up the economy for deeper cuts down the track, and can be easily boosted if global action increases. Just as for individuals, the cost for most businesses will be quite light, cushioned by compensation packages aimed at easing the initial pain. So it’s a gradual start, with a fixed carbon price from July 2012, then from July 2015 there’ll be a market – an emissions trading scheme with a floor and a ceiling price for carbon. This hybrid approach is a way of achieving long-term stability of the carbon price, encouraging investment in new technologies. This gradual start (due to industry and political opposition) means that the biggest short term impact should come through ambitious spending programs driven by revenue from the tax. A $2 billion a year Clean Energy Finance Corporation, run by an independent board of energy and investment experts, should kick-start investment in large scale clean technologies, and in improving our substandard industry energy efficiency and ‘clean’ goods manufacturing. Some revenue will be spent buying out and shutting down about 2000 megawatts of the dirtiest coal power, including Hazelwood or Yallourn power stations in the Latrobe Valley. A Climate Change Authority, run by former Reserve Bank chairman Bernie Fraser, will make annual recommendations on Australia’s greenhouse targets, based on assessment of what is happening

In the second evening lecture, Elizabeth Beale spoke about eco-fiscal policies with a focus on carbon pricing. According to Beale, increasing carbon emissions are not only harmful to the environment but also create several negative externalities such as damaging crops and higher health costs. For this reason, carbon pricing would help to shift these costs back to those who are responsible. Beale proposes two options for carbon pricing,, a carbon tax or a cap-and-trade system. A carbon tax is simpler as the government sets a price for greenhouse gas emissions. A cap-and-trade system is more complex as allowable emissions are capped, and then the government distributes emissions permits, which are tradable. Beale claimed that no one system is more superior than the other, especially as the differences between the two get blurred as more jurisdictions are adopting more blended systems. Beale concluded her lecture by looking at the current carbon pricing policies implemented throughout Canada. In British Columbia, a carbon tax of $30/tonne was implemented in 2008, which caused fuel use to drop by 16% from 2008 to 2013. In Quebec a cap-and-trade system was implemented in 2012 that covered 85% of emissions with the goal to reduce emissions to 25% below 1990 levels by 2020. However, despite the action on carbon pricing in these provinces, the Atlantic Canadian provinces have yet to implement any type of policy.

Over the years CO2 levels as a trace gas in the atmosphere has been increasing. This has raised significant alarm concerning its potentially harmful effects on climate change. To combat this, differing policies have risen to light. One of the more prominent policies is carbon cap and trade, which entails capping carbon emissions and allowing companies to trade their carbon allowance amongst themselves. This has both positive and negative implications for the US economy. The US should consider the potential effects a carbon cap and trade policy would have on the economy.