Essay On Carbon Credit

Carbon taxing coal-based products, in a revenue-neutral way, will help discourage overuse of fossil fuels. The United States needs to reduce carbon emissions in order to avoid the costs that pollution and climate change inflict on the general economy and individuals. Carbon, unlike other commodities exchanged and consumed in the free market, bears unique costs to the general economy that its market price does not encompass. The pollution we create when we consume carbon contaminates our air, raises temperatures, and makes severe weather events more frequent. A carbon tax is an economic mechanism that forces actors in a free market to come face-to-face with the social cost 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.

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

Cap and trade is a system aimed at diminishing the rate at which carbon is emitted into the atmosphere by creating an economic system based on meeting a certain minimal threshold or paying low-emitting companies for the right to emit in their place. For example, if company A only emits half of the emissions cap, that company can sell (or trade) the remaining credits to company B, should company B choose to emit one-and-a-half times the cap. A main objection to the cap and trade system is that it is not a strong enough means by which to curb emissions of fossil fuels and is inferior to specifically stronger carbon taxes. While initially appealing, the notion of simply strengthening carbon taxes fails to properly stifle carbon emissions and to adequately incentivize “green” development in comparison to the cap and trade system, preventing carbon taxes from occupying a central role to mitigate carbon emissions.

Another form of carbon credit trading applies to companies. If a company is having difficulties in sticking to maximum allowable emissions amount, it can use its resources to invest in an emission reduction project. This project will be one that produces carbon offsets, which he company may use to cover the amount that was they could previously not.

Cap-and-trade is a program which uses a market-based mechanism to control greenhouse gas emissions, the primary driver of global warming. The “cap” sets a limit on emissions, which is lowered over time to reduce the amount of pollutants released into the atmosphere. It limits emissions in electric power generation, natural gas, transportation, and large manufacturers. The “trade” creates a market for carbon allowances, leading to more cost-effective pollution cuts, and incentive to invest in cleaner technology. The less they emit, the less they pay, so it is in their economic incentive to pollute less. Each allowance (typically equivalent to one metric ton of carbon dioxide) are auctioned or allocated to regulated emitters on a regular basis.

CCS is s method that can be used to lower carbon dioxide emissions while enabling low-carbon electricity generation from power plants. CCS technologies are said to be able to reduce 80-90% of emissions form factories or plants that burn fossil fuels.

First we should understand how the carbon cap and trade system came about. The system of carbon cap trade used to be known as ‘emissions trading’, the alliance of free-market republicans and renegade environmentalists got the system adopted as national law in 1990 as a part of the Clean Air Act, to control the power-plant pollutants that cause acid rain, which is triggered by vast clouds of sulfur dioxide

Carbon Capture and Storage (CCS) is a means of separating out carbon dioxide (CO2) when burning fossil fuels and then disposing of it either underground or at or under the sea bed. Australia’s concern for the environment is one reason for them wanting to contribute to the development of CCS. In addition they also have the wealth to be able to investigate and implement this technology. India and China, on the other hand, despite their phenomenal economic growth are still relatively new economies who perhaps do not have

A carbon tax is a tax that is based on the amount of greenhouse emissions that are made from burning fossil fuels. The tax would either directly tax emissions or tax the fuels and chemicals that produce CO2 when they are burned. The carbon tax would be adopted by the federal government in an attempt to lower greenhouse gas emissions. The carbon tax is an economic instrument that can be a cost effective way of greenhouse gas emissions.

The charge is levied as a way of internalizing the negative externalities industries cause to society, that being the pollution of the environment. Hence, a carbon price shifts the burden for the damage back to those who are responsible for it, and those who can reduce it. Instead of arguing who should reduce emissions, where it should be reduced and how it should be reduced, a carbon price gives economic actors the incentives to reduce the damages they cause by rewarding those who promote clean energy and punishing those who continue to cause

Socolow and Stephen W. Pacala in their article, “A Plan to Keep Carbon In Check (2006)" suggests that “today’s notoriously inefficient energy system can be replaced if the world gives unprecedented attention to energy efficiency.” Taking steps to institute policies and be cost-efficient will entail structural change, but in the end will be in the best interest for countries to aid in the adaptation of lower carbon products and economic competitiveness. They further state that governments need “to stimulate the commercialization of low-carbon technologies” so there is less demand for fossil fuels thereby increasing “competitive options” for the future. (Socolow & Pacala, 2006) Consequently, the emissions of carbon dioxide into the atmosphere is causing the rise of global temperatures. Utilizing technology specifically for carbon capture and storage is crucial so we can slowly begin our process of adapting to other energy resources. It is also important that all countries participate in policies that will reduce emissions in a cost-effective

“The cap”: Each large-scale emitter, or company, will have a limit on the amount of greenhouse gas that it can emit. “The trade”: It will be relatively cheaper or easier for some companies to reduce their emissions below their required limit than others. These more efficient companies, who emit less than their allowance, can sell their extra permits to companies that are not able to make reductions as easily.

This is the third class I have taken where we have discussed cap & trade vs. carbon tax. I believe both systems have their merits and utilizing either one would positively affect climate change and the economy. I believe carbon taxes are the better of the two options because it is simple and immediately causes companies and individuals of ways to reduce fuel and energy consumption. Simply put the less fossil fuel used the less the tax affects the company or individual. Secondly money collected in taxes should be based right back to the businesses and individuals in the form of tax breaks and rebates. This will spark growth in the economy. Cap and Trade on the other hand set a predictable carbon dioxide levels and rewards companies for being beneath those limits by allowing them to sell their their unused allotment of carbon credits. Companies that have been able to meet their required levels can in turn by these extra allotments and in turn by themselves more time to develop new ways to reach the predetermined goal. This later system spars free trade and will have the overall affect of reducing carbon emissions however I believe it creates less of an initiative for bigger more lucrative companies to reduce carbon emissions and just gives them a way to buy themselves a way to continue to pollute above acceptable standards.

“For the time being, however, it is still the flexibility mechanisms that have attracted the most attention… (11).” The “flexibility mechanisms” are the offshore policies of joint implementation, clean development, and emissions trading. As the primary focus of the protocol and creating the biggest impact on international trade, these provisions in the agreement concern international trading of emissions credits.