Solo blog: Carbon Tax/ Cap and Trade
Given the pros and cons for cap and trade and carbon tax, which one is better? Are there alternative solutions that could work better? Should there be a combination of both? Please cite your sources!!!
Group 2
Ocean acidification is important because it impacts biodiversity. A falling ph level has detrimental impacts on species that build shells or skeleton based on carbonate. For example, tropical corals. Hence ocean acidification destroys ecosystems, resulting in the ultimate disappearance of certain species. The computer generated evidence predicts that if the carbon dioxide emissions continue to rise exponentially, this will result in the drastic increase in the ocean ph level. The levels of PH are predicted to rise as much as they have in the past 300 million years in the next 1000 years. The computer models used past historical and geographical evidence to see what the natural rise would be and compared it to the rate at which ph levels are rising today. It would be difficult for nature to compensate for these damages. Consequently, resulting in further reduction on the marine biodiversity, specifically, coral reefs. Aidan Coco Grace Miske Jingyi Li Ling Zheng
ReplyDeleteSamone Parker-Watson
I think that a cap-and-trade system is a better method for reducing carbon emissions within the environment. With a cap-and-trade system, the government establishes a set limit or cap on the overall carbon emissions that are polluting the atmosphere (David Suzuki Foundation). Industries must not go over their specific cap for their amount of carbon emissions. If they do, they can buy another company’s allowance, which still allows the overall carbon emissions to remain under the total emissions cap. With these strict carbon quotas, the system allows for industries to gradually reduce their carbon output. Likewise, Noah Kaufman states in his article, “Carbon Tax vs. Cap-and-Trade: What’s a Better Policy to Cut Emissions?,” a cap-and-trade policy increases certainty that emissions will fall especially with governments setting emissions caps that declines over time (World Resources Institute). Furthermore, these reductions allow industries to search for alternative energy sources as the cap tightens.
We also know that the cap-and-trade systems can be successful. For instance, the U.S. government enforced a cap-and-trade system during the 1970s to reduce the sulphur dioxide and nitrous oxide emissions that created acid rain (David Suzuki Foundation). These gradual reductions were successful and the environment become healthier with the developments of the Clean Air Act and its amendments throughout the years. While some may not like increased government involvement, I think that the cap-and-trade system forces the government to hold industries accountable for their carbon emissions and makes the government active in the efforts of reducing carbon in the atmosphere.
https://davidsuzuki.org/what-you-can-do/carbon-tax-cap-trade/
https://www.wri.org/blog/2016/03/carbon-tax-vs-cap-and-trade-what-s-better-policy-cut-emissions
First and foremost, the pricing emission of carbon is an effective way to regulate air pollution caused by overproduction. Both carbon tax and the cap-and-trade system can provide strong incentives for companies to reduce their emission of carbon through investing in clean energy or other alternative solutions. The momentary motivations are strong for business leaders who always calculate the cost and benefit before set the business plans. Companies, especially those relying heavily on burning fossil fuels, will be "forced" to face the negative externality that they posted on the public goods for decades.
ReplyDeleteBesides the common merits shared by those two methods, there is much discussion on the debate on whether we should choose a carbon tax or cap-and-trade system to control air pollution without hurting the growth of the economy. The most apparent advantage of using the cap-and-trade system is that the government could have a clear sense of the amount of reduction on carbon emission each year and gradually lower the cap to meet the goal. It also gives companies more flexibility on how they will manage their resources whether to reduce production or bid for a high price each year. Moreover, cap-and-trade regulation is proven to be effective in cutting the Sulphur dioxide and Nitrous oxide in the past. By implanting the cap-and-trade system, the rain-forming emissions reduced nearly half the amount and the benefit of reducing heath spending is noticeable.
However, the fluctuations in the cap-and-trade pose a great threaten for business to accurately budget the cost and estimate the selling prices. Also, under the economic downturns, the cap-and-trade maybe not very effective in regulating pollution since there are many permissions in the market. Moreover, the cap-and-trade will face a challenge to form an international system. The developing area or developing countries are running for the bottom line to lower the price of emission. The heavy polluted companies may shift their business from developed countries to developing areas and this practice won't effectively reduce the globe emission. Compared to the more flexibility cap-and-trade policy, the carbon tax will be more rigid and hard for the government to directly measure the reduction of emission.
One noticeable advantage of a carbon tax is that the tax system was introduced by the market for a long time. The government doesn't have to set up a new trade market for carbon and some companies may confuse about the purpose of cap-trading emission. In other words, most of the government can quickly and easier to implant the carbon tax adding on the existing tax system. In addition, effective legal enforcement and strong international regulation are prerequisites for either cap-and-trade or a carbon tax.
The real question is how the government uses money from the business to protect the public goods. For the public and business, the tax paid for the government is seemly like to donate to the black box. Lacking transparency in using tax revenue can weaken the public and business's supports on climate change policies. Thus, government and publicly-funded labs should take their responsibilities on educating the public about why they should pay climate-tax and how they will get long-term benefits from doing that. Another alternative method is to promote the green trends of businesses like reducing overpackaging, promoting, shared ownerships (sharing cars and bikes), building public transportation and so on.
Reference:
https://davidsuzuki.org/what-you-can-do/carbon-tax-cap-trade/
https://www.wri.org/blog/2016/03/carbon-tax-vs-cap-and-trade-what-s-better-policy-cut-emissions
https://vittana.org/20-cap-and-trade-system-pros-and-cons
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ReplyDeleteBoth the carbon tax and cap-and-trade are good methods for incentivize the reduction of carbon emissions. They put pressure on industry to clean up its energy use in order to avoid higher expenses. The implementation of both the carbon tax and cap and trade have strengths and weaknesses, but I would argue that a carbon tax is a simpler and more easily administered means of reducing emissions.
ReplyDeleteThe carbon tax immediately benefits the environment by incentivizing a large cut in carbon emissions: companies will try to reduce their emissions in order to pay less taxes. Countries such as Chile and Colombia have implemented carbon taxes with success, and many other countries are considering them as well. The carbon tax is also easier for companies to understand, as it sets a distinct price for carbon emissions. Companies can more easily prepare themselves to pay a certain price for its emissions. The carbon tax also brings in revenue and may allow for the reduction of other tax rates. The carbon tax can also be directed in a way that it mostly affects big business, which creates the most pollution. Once the carbon tax is set, it is likely to remain the same, which makes it predictable and stable for companies.
Conversely, cap and trade is more vulnerable to political manipulation. The cap can be changed, so politicians can choose to raise or lower it as they please. This means that as administrations change, the cap can fluctuate, making it difficult for companies to predict how much emissions they can produce. Due to the increasingly polarized debate regarding climate change, the cap could easily fluctuate or even disappear. Cap and trade also allows wealthier companies to purchase the ability to pollute from less affluent companies, which could hurt the production of smaller companies.
Citations:
.https://www.brookings.edu/research/the-many-benefits-of-a-carbon-tax/
https://www.brookings.edu/blog/planetpolicy/2014/08/12/pricing-carbon-a-carbon-tax-or-cap-and-trade/
https://www.wri.org/blog/2018/12/carbon-price-can-benefit-poor-while-reducing-emissions
It is clear that there are issues with both cap and trade and carbon taxes. Neither method is a perfect solution for reducing greenhouse gas emissions. Instead, we should use both in order to aggressively combat climate change and make strides in the clean energy sector.
ReplyDeleteCap and trade places a ceiling on a companies' overall rate of carbon emissions and then allows them to trade with other companies to increase that allowance. A benefit of the cap and trade system is that permits are often given out for free, and the only cost that companies incur is through trading. This makes companies more likely to cooperate with the system. A successful model of cap and trade is the Regional Greenhouse Gas Initiative, the first mandatory market-based program implemented in the United States. States in the New England area have mandatory caps on their greenhouse gas emissions and are able to trade with one another. The cap on their emissions declines 2.5% each year from 2015-2020, forcing companies to proactively change their businesses to reduce emissions. The RGGI program has encouraged innovation in clean energy and created green jobs in these states.
Carbon taxes place a set price on carbon itself rather than the total amount of emissions. One complication to the carbon tax is that the rate has to be high enough to encourage companies and individuals to lower emissions, but not enough to impact things like gas prices and profits. Inversely, the tax rate cannot be too low or companies will pay without reducing emissions. Given public resistance to increased gas prices, we should explore the various models of carbon taxes. One of these is the revenue neutral system, first used in British Columbia. In this system, tax revenue is returned to the citizens through personal and business tax measures, such as reductions in personal income tax rates and corporate income tax reductions. As stated in the Guardian article, both carbon taxes and cap and trade are just two of the policies necessary to cut emissions. We must use all available methods in order to avoid the climate disaster at hand.
https://unfccc.int/climate-action/momentum-for-change/financing-for-climate-friendly/revenue-neutral-carbon-tax
https://www.theguardian.com/environment/2013/jan/31/carbon-tax-cap-and-trade
https://www.rggi.org/
I think that cap and trade is the best system to implement in order to reduce overall carbon emissions. This method creates a specific total cap for a set number of emissions “allowances” that can be produced by companies, allowing a company to emit one ton of emissions. The government distributes the allowances to these companies, either for free or through an auction. If one company does go over their set amount, they can purchase a portion of another companies share, which ensures they're under the total emissions cap. One of the benefits of this method is that it can more quickly lead to cuts in pollution. The cap typically declines over time, providing a growing incentive for industry and businesses to reduce their emissions more efficiently, while keeping production costs down. This system can also help to reduce other emissions besides carbon dioxide. An NRDC analysis of a potential cap and trade system, considered by the U.S. Congress, found that setting limits on carbon dioxide emissions would have a positive impact on the number of additional pollutants that get added to the atmosphere every year (EDF). Although a carbon tax makes polluting activities more expensive, it also makes green technologies more affordable, encouraging these green solutions to be implemented. Both programs could be implemented in tandem, depending on each area assessing the pros and cons of cap and trade for their area. If a cap would be sufficient, then a carbon tax could be used. For example, the province of Alberta in Canada uses a hybrid policy that covers the largest carbon emitters with a cap and trade system, while smaller producers must pay a carbon tax. Overall, while both programs have their advantages and drawbacks, I think that cap and trade provides more certainty about the amount of emissions reductions, making it a superior program.
ReplyDeletehttps://www.edf.org/climate/how-cap-and-trade-works
https://davidsuzuki.org/what-you-can-do/carbon-tax-cap-trade/
https://vittana.org/20-cap-and-trade-system-pros-and-cons
In the fight to limit carbon emissions, scientists and officials are coming together to figure out the best way to reduce the effects of human actions. The release of chemicals and greenhouse gases will continue to be deadly for humans and for the environment if a viable solution is not agreed upon. Many options have been weighed, but not many have put in place which leads us to the conclusion that these strategies are complex. Two options that have been analyzed are a cap and trade system, which establishes a price for all emissions, and a carbon tax, which puts a direct tax on carbon. Although both a carbon tax and a cap and trade system are efficient ways to cut down on carbon emissions in society, a carbon tax will produce better results in the long run.
ReplyDeleteEach strategy has pros and cons, but the carbon tax is a more efficient and easily understandable way to hold people accountable for their actions. The looming threat of a tax almost automatically reduces carbon emissions as companies do not want to be taxed more for the carbon that they are releasing into the atmosphere. This ensures that companies and people who are completing these environmentally endangering actions are held responsible. This is due to the fact that they are forced to pay a set cost for the excess carbon that they are releasing. A carbon tax also facilitates strategic creativity. This is because companies who do not want to pay a greater amount because of the tax are inspired to come up with new environmentally friendly systems for production so that they are not simply releasing carbon into the air on a whim. A cap and trade system, on the other hand, involves a comprehensive cap with allowances, but falls short when it comes to companies taking action, a potentially rigged system, and effort to get past the set targets in terms of decreasing carbon emission levels.
These two strategies are two of the most talked about plans and when combined with better daily habits, they have the ability to positively impact the society that we live in by reducing carbon emissions.
https://www.wri.org/blog/2016/03/carbon-tax-vs-cap-and-trade-what-s-better-policy-cut-emissions
https://www.economicshelp.org/blog/2207/economics/carbon-tax-pros-and-cons/
https://vittana.org/20-cap-and-trade-system-pros-and-cons
Cap and trade system aims to reduce carbon emissions by setting a cap on the emissions amount and have businesses buy and trade allowance to emit a specific amount of carbon dioxide (IER, 2009). There are several pros of this political strategy. First, it motivates/ forces businesses to adopt more environmentally friendly practices (IER, 2009). Second, it leaves some wiggle room for companies who need more allowances to trade with other businesses, resulting in a win-win situation for both the government and the business (Grantham Research Institute, 2013).
ReplyDeleteOn the other hand, the cons of this strategy mostly concerns with the cost and economic impacts on both businesses and the public (IER, 2009). First, by forcing businesses to switch to more costly methods, the price of energy will increase. This is problematic for the poor. According to the Congressional Budget Office, a 15% decrease in carbon dioxide emissions would cost the lowest-income Americans 3.3% of their income. Second, a higher energy costs might lead to companies moving their businesses to foreign countries, resulting in reduction of jobs and economic activity. This is especially problematic for chemical companies because they use natural gas as both an energy source and feedstock (IER, 2009).
Carbon tax imposes a tax on each unit of carbon emission. This strategy is beneficial for firms because it sets the price of carbon emission at a fixed amount. In addition, the government could reuse all the tax dollars and invest in more environmentally friendly technology (Grantham Research Institute, 2013).
On the other hand, the cons of this strategy mostly concerns with the risk of not giving a fixed cap on the emission amount (Grantham Research Institute, 2013). First, the quantity of pollution production is in the hands of companies. This is risky, especially for firms that weigh the cost of carbon tax as less than the benefit of sticking with their current practices. Second, it is difficult to set the “right” tax level in order to incentivize firms to be more environmentally friendly. More specifically, a tax that is too low is not effective and a tax that is too high might affect profitability, unemployment, and the end price for consumers (Grantham Research Institute, 2013).
I believe that a combination of both strategies should be used for the most optimal outcome. More specifically, using the cap system as the framework. Yet, instead of letting companies trade allowances with one another, they will have to pay carbon tax for the additional emissions. This combination strategy is better because it provides certainty for both the government and businesses, meaning that both parties are on the same page about the emissions goal and know the exact consequences for going over the allowance amount (instead of letting companies decide on the trading price, which is unfair and puts the buyer in a disadvantaged position).
https://www.theguardian.com/environment/2013/jan/31/carbon-tax-cap-and-trade
https://www.cfr.org/expert-roundup/cap-and-trades-economic-impact
I believe the cap and trade policy is the best method of regulating carbon emissions. A cap and trade policy allows the buying and selling of carbon emissions. If a firm use less carbon emissions in their production process they can sell their ability to emit carbon to a firm that relies more on polluting activities. This is a marketplace solution to reducing carbon emissions and allows for a more efficient reduction in pollution. A hard cap may put companies that rely on processes that emit large amount of carbon out of business while offering greener companies little incentive to innovate. A cap and trade system always encourages innovation since a firm can sell their emissions to other companies and increase their profit (Connif 2009). To some extent this approach is also based on human psychology. Humans hate being told what to do, a hard cap is essentially a command from the government. A cap and trade approach on the other hand makes it feel like things are in their control. They can outsmart their competitors and turn a profit in the process. Both because it is more acceptable for businesses and leads to the most efficient distribution of pollution, a cap and trade approach is the best way to limit carbon emissions.
ReplyDeleteCap and trade also has a track record of success. In California the cap and trade program was universally blasted at inception however in 2016 there were only 3% above their goal of reducing emissions to pre 1990 levels (Busch 2016). Meanwhile state job growth has outpaced the rest of the nation by 50%, showing that the program still offers significant room for economic gains. California does illustrate the sometimes rocky path to pricing emissions under such a model but overtime the market has proven capable of straightening out.
https://www.greenbiz.com/article/california-cap-and-trade-success-disguise
https://www.smithsonianmag.com/science-nature/the-political-history-of-cap-and-trade-34711212/
Shane Brackup
ReplyDeleteSolo Blog - 11/10/2019
Neither a cap and trade system or a carbon tax is the best way to fight climate change. Both of these proposals are associated with many drawbacks that cause them to be less favorable. Domestic policy solutions are less effective than those that allow climate change to be tackled by the international community.
A solution that would be better is encouraging the development of nuclear power and natural gas. The International Atomic Energy Agency reports, “Nuclear power makes a significant contribution to reducing greenhouse gas emissions worldwide while fulfilling at the same time the increasing energy demands of a growing world population and supporting global sustainable development. Nuclear power plants produce virtually no greenhouse gas emissions or air pollutants during their operation and only very low emission levels during their entire life cycle. As a result, the use of nuclear power avoids the emission of nearly 2 billion tonnes of carbon dioxide every year – the equivalent of taking over 400 million cars off the road per year.” The increased use of nuclear power would also cause a reduction of coal burning into the atmosphere and lower carbon emissions. Coal is one of the leading carbon dioxide emitters in electricity production. An effective way of preventing having to burn fossil fuels is through encouraging nuclear power. The Bulletin of the Atomic Scientists writes, “According to a forecast by the Russian Academy of Sciences, the share of coal in global electricity production will be 34.5 percent by 2040; for nuclear, just 8 percent. If we managed to replace 34.5 percent of electricity production with low-carbon energy sources, then we have a better chance to reach sustainability goals.” The scientific evidence/statistics support the development of nuclear power to help fight against climate change.
The development of new technologies, such as nuclear power, will be more useful for preventing climate change than any domestic governmental policy. A domestic policy only affects American citizens and producers. As we have learned, climate change is caused by many countries, often most significantly by countries in Asia such as China. The United States alone cannot fix climate change. The support of nuclear power internationally would produce more substantial results that help to tackle climate change on the world stage.
Sources:
https://www.iaea.org/topics/nuclear-power-and-climate-change
https://thebulletin.org/2019/06/nuclear-power-and-global-climate-change/
ReplyDeleteI think that cap and trade system has many advantages because this system places an overall cap on carbon emissions, unlike the carbon tax which does not actually place a limit on the amount of emissions, it only taxes the emissions. Therefore, I think the cap and trade system is a better system because this method has the potential to decrease the amount of carbon emissions over time. Kaufman writes, “By setting an emissions cap that declines over time, a cap-and-trade policy can increase certainty that emissions will fall below the predetermined emissions targets” (Kaufman 2016). This cap can be lowered over time in order to reduce the amount of total carbon emission, unlike the carbon tax. The carbon tax can not guarantee that there will be a decrease in the emission and the most important goal is to lower the carbon emissions.
A combination of the carbon tax and a cap and trade tax would be interesting because it will not only limit the overall carbon emission through the cap but it would also tax the amount of carbon that is used. Therefore this will discourage the amount of carbon that is emitted and encourage more eco-friendly alternative energy source. This will also get lowered the amount traded because corporation would have the incentive of lowering their emissions so they don’t get taxed that much. As Melanie Curry writes, “Under a “cap-and-tax” system, the main driver of emissions reductions would be the declining cap, not the tax, said staff. The tax would, however, be a source of revenue,” (Curry, 2017) the tax will also generate income. This method provides the benefits of both of these methods.
Sources
Curry, Melanie, et al. “CARB Considers Alternatives to Cap-and-Trade.” Streetsblog California, 23 Oct. 2018, https://cal.streetsblog.org/2017/02/16/carb-considers-alternatives-to-cap-and-trade/.
Kaufman, Noah. “Carbon Tax vs. Cap-and-Trade: What's a Better Policy to Cut Emissions?” World Resources Institute, 26 Sept. 2018, https://www.wri.org/blog/2016/03/carbon-tax-vs-cap-and-trade-what-s-better-policy-cut-emissions
I believe that the cap and trade if done effectively is the better option out of the two. Cap and trade would allow for individuals, public, and private interest groups to buy carbon emissions but not use them. Also through actually implementing a concrete number in which countries and companies have to keep under, it will ensure that emission targets can actually be met. Also, because of the perceived instability of carbon prices that would come with this policy, it would push and force more individuals to focus on more stable energy supplies such as green energy. However, one major contention for cap and trade is that it does not allow for emission numbers to continue to go down once set. A solution to this would be to implement projected and gradual reductions of allowances for carbon emissions. This way, there would be continual improvement in industries and a push towards cleaner energy. However, the most effective way would be to combine the positive aspects of both a cap and trade system and a carbon tax. Economists and scientists should come together to calculate the damage done on the environment through a carbon emissions. They then can implement a cap in which if you go over the set number, you have to pay a carbon tax that is calculated to cover all negative externalities. Then, the revenue produced from carbon taxes can be used to invest in green energy sources or other means of mitigating carbon emissions and helping the environment when it comes to ecosystem deteriation and climate change.
ReplyDeletehttps://www.huffpost.com/entry/cap-and-trade-versus-the_b_312835
Pricing carbon through a cap-and-trade system or a tax is a highly controversial task. A cap-and-trade system essentially establishes a price on greenhouse gas emissions and charges companies a tax for every ton of carbon used. A cap-and-trade system essentially calculates a specific amount of carbon-emissions allowances per year. Both are very good ideas in theory but have a number of implications that must be considered. A carbon tax is particularly effective because it will offer stable carbon prices so energy producers can make decisions without the risk of regulatory costs. Furthermore, supporters of the carbon tax claim that the tax will encourage producers to explore and invest in alternative energy, which is highly beneficial for climate change. Supporters of the cap-and-trade system feel that this mode is effective because there is certainty that emissions may fall below the emissions target, which is clearly beneficial from an environmental perspective. Despite these advantages, both are clearly flawed, which is inevitable in environmental policy. The carbon tax may be inefficient because many companies will not feel an incentive to use less carbon. Because carbon emissions are cheap and accessible, companies may be unaffected by this tax and resort to paying the tax. The tax must be high enough where companies acknowledge this and reduce their carbon emissions but it is difficult to implement a high tax for something so prominent in emissions. A cap-and-trade system is flawed in that no definite progress will occur beyond the carbon emissions target.
ReplyDeleteWith these advantages and disadvantages in mind, I feel that the cap-and-trade system would be a better policy to implement on a large scale. The cap-and-trade system would certainly reduce emissions which should be the highest priority when pricing carbon. However, a combination of both the cap-and-trade system along with a carbon tax would be challenging, but the most effective. Environmental policy can focus on how casual carbon emissions of humans can be reduced by creating a policy that acknowledges the carbon individuals produce on their own through transportation, for instance.
https://www.brookings.edu/blog/planetpolicy/2014/08/12/pricing-carbon-a-carbon-tax-or-cap-and-trade/
https://www.wri.org/blog/2016/03/carbon-tax-vs-cap-and-trade-what-s-better-policy-cut-emissions