Which System Will Work Better, a Carbon Cap, and Trade System or a Straight Carbon Tax - Coursework Example

For reducing emissions of carbon dioxide, which system will work better, a carbon cap and trade system or a straight carbon tax? Carbon dioxide is one of the major greenhouse gasses emitted via activities closely linked to human beings. It accounts for about eighty percent of all greenhouse gas emissions in the United States. Carbon dioxide is available in the atmosphere naturally and forms part of the carbon cycle. However, human activities such as industrialization are altering this carbon cycle by injecting more carbon dioxide to the air as well as by affecting the ability of natural sinks such as forests, to reduce carbon dioxide from the air. It is because of this that most governments have decided to take immediate actions to save the environment from the risks associated with this issue. However, most countries including the United States have not been able to agree on the best way of curtailing carbon emission. Some stakeholders are in favor a carbon cap and trade system others are in favor a straight carbon tax system. This paper holds the position that a federal law such as the cap and trade is necessary to accomplish emission reductions. But first it begins by exploring what other people say about a straight carbon tax. A straight Carbon tax system A straight carbon tax system imposes a tax on units of greenhouse gas emitted and gives companies an incentive to decrease pollution. This method according to proponents would cost less compared with paying the tax. With this, the amount of pollution minimized depends on the tax level chosen. The straight carbon tax is set by evaluating the damage and cost related to each unit of carbon dioxide emitted as well as the costs connected to controlling that emission. In this case, getting the level of tax correct is important. That is, when it is too low, organizations are likely to go for the tax in order to continue emitting the gas, over what has been agreed. On the other hand, when the tax is high, the costs are likely to rise higher when compared with what is needed to minimize emissions, affecting returns, end users and even jobs. A carbon cap and trade system A good number of people support a carbon cap and trade system. In their argument, a carbon cap and trade system sets an amount of carbon dioxide emitted, so that companies should pay money for their over emissions, and they also will be charge seriously (Dinan and Spoor 15). At the same time, some companies may have some redundant emission, so they can sell it to other companies who need more emission of carbon dioxide. According to this system, it will prompt the counties’ economy and maximize a company’s profit (Hsu 2011). Last but not the least, this program let company to make their effort to deal with the problem in discharging carbon dioxide. Supporters of this system also hold the view that this approach sets a very clear goal for reducing carbon emissions. In fact, with a straight carbon tax, people tend to make mere assumptions regarding the extent it can be sued to cut down carbon emissions (Cuff and Goudie 100). The point is that a straight carbon tax may not even be enough to sufficiently change the current scale of global warming (Cullen, Vanderwolk and Xu 124). This argument is borrowed from the Australian case where the mechanism has been in use for sometime now. It has failed to deliver an aspect that has forced the country to adopt a carbon cap and trade system (Cullen, Vanderwolk and Xu 125). In the case of a carbon cap, imposing a declining cap offers strong reduction targets as well as a system for quantifying them. My position I support carbon cap and trade system. From an environmental viewpoint, the benefit of a carbon cap and trade system over a straight carbon tax program is straightforward: A carbon cap and trade system puts a lawful limit on carbon emissions whilst a straight carbon tax program does not (Cullen, Vanderwolk and Xu 125). In fact, speculating what tax level might limit the level of carbon emitted as it has been mentioned is not a constructive position to take. Only a carbon cap and trade system with strong targets in terms of reducing emissions as well as uncomplicated systems for attaining them can ensure that this environmental goal is fully achieved. On the economics front, a carbon cap and trade system also has some advantages. That is, when markets that compensate reductions of carbon emissions are established, the vast expertise, venture capital and manufacturing foot of both the state and private sector is channeled towards a reduction in carbon emissions (Dinan and Spoor 16). The point here is that the private sector has enough resources that when put to work can easily turn things around in the shortest time possible. Unlike the tax which could easily range millions of dollars in a year, from the Environmental Protection Agency, a carbon cap and trade system will only cost as little as US$100 annually although the specifics of arriving at this amount is yet to be established (Roos, Barber and Brackley 18). The only thing that is clear is that, the United States Congress has many alternatives for making sure that the carbon cap to be imposed is fair and also ensure that end users are fairly treated as they endeavor to change to an economy that is pegged on low-carbon emissions. The other reason why I support carbon cap and trade system is that it been successful in controlling other greenhouse gases. In the mid 1990s, the United States EPA had finalized its findings regarding the level of acid rain both in the Northeast and in the Midwest. In response, the Environmental Protection Agency developed a market based approach known as cap and trade system, the first mechanism to be adopted in the US. The acid rain that was being witnessed was attributed to increased levels of Sulfur Dioxide which resulted from factories in the Midwest that relied on coal as a source of energy. This agency managed to cap these sources at about 10 million tons of Sulphur dioxide and the factories were supposed to lower their levels of emissions. The Environmental Protection Agency as well issued each factory with a certain level of allowance or credit in terms of what they would produce. Each company or factory would tender in a report to the Environmental Protection Agency at the end of each year showing the amount of their emissions (Roos, Barber and Brackley 18). Those factories under this system could save their extra credits for use in the future, or could sell them to other companies that were likely to surpass the set limit. Generally, this aspect of trading gave the electric companies some financial incentives to significantly cut down their emissions based on the fact that each credit or allowance given had some monetary value attached to it. In this case, if a factory went over their set limit or surpassed their credits and was not in the position to trade for or purchase other credits from other companies, they would be fined by the Environmental Protection Agency for any extra or additional amount of sulphur dioxide added into the atmosphere. To this day, this program has been a great success. For instance, the level of sulphur dioxide emitted into the atmosphere in the 1980s was about 18 million tons, and today is estimated to have reduced by 10 million tons to reach 8 million tons. Conclusion The debate around this issue diverts attention. This is because it merely frames the issue of carbon reduction in terms of monetary policies, that is, the minimum and maximum level of tax as well as how to manage the revenue associated with the program instead of emphasizing on how fast global warming has to be reduced. The global warming crisis is so critical that people should not afford time waiting for legislators and industry players to spend a great deal of time just trying to understand the details entailed in a new program. A carbon cap and trade system has been employed successfully in different countries including the United States to limit emissions of gases such as nitrous oxide and sulphur dioxide. As a matter of fact, for many years the carbon cap and trade system has managed to lessen emission of these gases as well as the resultant acid rain by almost half an aspect that has resulted in a sustainable environment. In short, there is enough experience in terms of curbing global warming using cap approaches. That is, whilst the straight carbon tax program remains fully untested, carbon caps are already being employed in the EU as well as in many other states and a good example is California which is in the last stages of employing it. Works Cited Cuff, David and Andrew Goudie. The Oxford companion to global change. New York: Oxford University Press, 2009. Cullen, Richard, Jefferson Vanderwolk and Yan Xu. Green Taxation in East Asia. Cheltenham: Edward Elgar Pub.,, 2011. Dinan, Terry and Christian Spoor. An evaluation of cap-and-trade programs for reducing U.S. carbon emissions. Washington, D.C: Congressional Budget Office, 2001. Hsu, Shi-Ling. The case for a carbon tax: getting past our hang-ups to effective climate policy. Washington, DC: Island Press, 2011. Roos, Joseph, Valerie Barber and Allen Brackley. Cap and Trade: Offsets and Implications for Alaska. New York: DIANE Publishing, 2010. Read More