Econ 339: Topic #6 Cap and Trade or Carbon Tax
Wade Wong 25967118
Catherine Douglas Econ 339 University of British Columbia November 28 2012
The progress of technology change has increased dramatically around 1960-2012, a lot has been changed for the better of the world, and some technologies do not share the same path. Many of them are disembodied technology as process of production, methods, and labour efficiency has been vastly improved. On the other hand because most production or technology involves burning resources, wastes dumping, and gas emitting, it results in global warming, which is determined to affect the future of the world. The pollution causes a negative externality not just on specific individuals, but to the whole population and environment. To solve this problem, government intervention is a necessity for firms and individuals to completely comply with the situation for the welfare of the society (Samaras). In dealing with this crisis, nations or governments had implemented plans that would help reduce the emissions emitting from power plants, buildings, appliances household, and automobiles; the plans are “cap and trade system” and “carbon tax plan” (Samaras). With the cap and trade system, the governments sets a emission target on polluters of how much emission they can produce, and grants slips to firm if they need to produce over the target emission level. For carbon tax, it is a tax imposed on users that burn fossil fuel (gas). After heavy mass productions in early years, it’s inevitable that global warming is going to happen; right now it’s whether the damage can be greatly reduced. For a effective emission reduction, nations propose carbon decline of thirty percent by 2020 and eighty percent in 2050 (Cap and Invest). Both plans are great in energy saving technology, but which is more efficient and more effective in reducing emission? From the collected data, there’s a huge indication that cap and trade system is a better solution in reducing emission emitted, for a better market, and allows standard efficiency for every individuals. Emission reduction is the main goal in this plan, cap and trade system is known for the lowest costs reduction in SO2 (Cap and trade vs. Taxes) and carbon tax is known for having the lowest transaction cost and other simple costs (Sustainable Prosperity). Cap and trade policy promotes the facilitation of Cogeneration (Center for Climate and Energy Solutions). Cogeneration is a combination of heat and power (electricity) as an energy source, it lowers fuel consumption and emissions than if it was separately used (Center for Climate and Energy Solutions). It reduces most emissions from industrial sector and provides on-site electricity for industries (Center for Climate and Energy Solutions). Carbon tax puts individuals to “think twice” of polluting, as well as putting the tax revenue into green technology as their way of reducing emission (Sustainable Prosperity). This is not quite valid in determining emission reduction within carbon tax plan. For instance, under cap and trade program, there is a set goal in emission level that is to be maintained, whereas carbon tax is tax implied upon individual of emissions used or pollution source obtained (Samaras).Don Cayo a writer, argues that within British Columbia not all emission reduction is related to carbon tax, other factors may have been the solution (Cayo). With the set goal, firms will only be able to pollute certain amount of emission (CO2, SO2, wastes), which relates to the amount they can produce their products or operation (Samaras). With that in mind, firms may have the motivation to find ways to reduce
the emissions they emit and be able to produce more or sell the permits they do not need (Cap and Invest).Under the cap and trade system the main target to maintain the emission big firms or industries emit whereas carbon tax hit the industry but also to household and small size firms (Sustainable...
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