Summary: Non Regulatory Approaches

Refer to the above table. Suppose the government commands each firm to reduce its emissions by 1 ton each and allows these two firms to trade pollution permits. If a 1-ton credit is sold for $175, the total cost for both companies combined to reduce emissions by a total of 2 tons could be as low as:

A solution to this inefficiency is direct regulation whereby the government tells the company how much it is allowed to pollute. This is known as a pollution permit – the Government give out the legal right to admit carbon to the atmosphere. Another solution is known as the command and control strategy – whereby detailed regulation of technology leaves polluters little choice in how to achieve the environmental goals. One other policy which is seen to be the most efficient, is imposing emission fees known by economists as a Pigovian tax. Under a system of Pigovian taxes, the government charges for the damage done by polluting. By doing so it converts the external cost into an internal cost (internalizes the externality). According to the article “Equilibrium Pollution and Economic Development in China” there is one such levy system in place whereby it formally requires that a fee be paid by any enterprise whose effluent charge exceeds the legal standard. This has been proven in the article to be an effective way of regulating pollution. This implementation of the tax can be shown in the diagram below.

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 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,

Imagine a world where no one can breathe. Clean air is only for the wealthy, and personalized air masks are all the rage. This scenario may seem like the plot to some dystopian novel, but this setting is a lot closer to becoming a reality than most people would imagine. In 2012, the world dumped 31.6 billion tons of carbon into the atmosphere- nearly 2.4 million pounds of carbon per second (CBS). If the world continues to carelessly dump carbon into the air that people breathe, then humanity should prepare for a future where gas masks are a necessity. But nobody wants that. In order to address the global issue of rising carbon emissions, governments around the world should institute pollution and carbon taxes as monetary and legal

This amendment allowed the government to enforce the cap and trade on specific companies and established the allowances market to commodify emissions. By treating emissions as a commodity, businesses are able to trade and sell allowances to either stay within regulations or gain revenue by being more efficient than others. The EPA’s first phase began in 1995 with the enforcement of 110 companies to reduce emissions, and the second phase was to include coal burning power plants. Overall, this led to a decrease by 41% of emissions compared to the 1980s. The ability of the government to enforce these cap and trade policies as well provide the public with a clear understanding of the ramifications of acid rain is a clear projection of the credibility of the science being put forth.

Effective economic and legal mechanism is capable of maintaining a proper measure of correlation between economy and ecology at a reasonable level with lesser amounts of direct investments. To implement this condition in the economic and legal mechanism of environmental regulation, it is required to combine three basic functions:

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?

I believe tax incentives are effective in reducing the level of pollution because everyone’s is benefiting- the people and the environment. Tax incentives are meant to improve the environment or reduce the negative impact on the environment or create a maintainable environment. Tax incentives are a kind of economic instruments to address environmental problems. It is generally believe that tax incentives will reduce environmental harm in the least costly manner, by encouraging changes in behaviour by firms, organizations, communities and households and individuals. Taxes on pollution provide clear incentives to polluters to reduce emissions and seek out cleaner and sustainable alternatives.

For example high-tech inventions that produce pollution needs to be controlled so it won’t weaken the environment. According to Jonathan B. Wiener’s, Regulations of Technology, and the Technology of Regulation, “Regulations is a set of techniques for changing production functions to produce fewer of some outputs such as pollution or more of others.” For most people they think the government is right for setting these types of rules so harm wouldn’t continue. “The influence of regulation on technology is complex and depends on the technology of regulation and the design and instrument choice of regulatory

In managing the emissions of GHGs(Green House Gases), carbon taxes will be imposed mid 2012. "Economic theory anticipates that with the increased costs of emitting GHGs, drives emitters to downsize their activities." Salem Press (2009)

Growing public concern regarding environmental issues means that decision makers can no longer assume that the public will continue to tolerate continuing environmental exploitation. Especially if this lead to damage of the environment.

Where there are several parties responsible for the damage, the allocation of costs should be decided by the state laws (Beder, 2006). In short, the state has to ensure the polluter pays by: monitoring what polluters can discharge into the environment to able to install their own pollution control equipment; charging polluters taxes and levies to cover government environment protection costs, including the cost of sewage treatment facilities; making polluters liable for the damage they cause (Beder,

Actors and governance components include public, private, and a civil society that engage in the authority of regulating factors that impact the environment based on their relationships. In various ways they are able to fulfill a host of governance over activities across their components. These

Pollution, specifically global warming, is of growing concern to people and governments. It is a controversial issue whose validity is still being debated by scientists. The Kyoto Protocol is an international attempt to address global warming through emissions controls. Traditional neoclassical economic models do not incorporate pollution in rudimentary theories of supply, demand, or pricing, as a result, firms do not consider pollution as a cost of production, which leaves government regulation as the primary method for controlling these externalities. The goal of emissions trading is to allow one business, which can make greenhouse gas emission reductions for a relatively low cost, to sell