This article discusses the regulatory approaches to carbon emissions, including carbon tax and carbon trading. It also explores the advantages and disadvantages of each approach and suggests alternative methods to reduce carbon emissions. The article focuses on Canada and its efforts to reduce carbon emissions.
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Running head: REGULATORY APPROACHES TO CARBON EMISSIONS Regulatory approaches to carbon emissions Name of the Student: Name of the University: Author Note
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1REGULATORY APPROACHES TO CARBON EMISSIONS Carbon emission is the release ofthe harmful carbon dioxide into the Earth’s environment. Due to the burning of the large amounts of fossil fuels such as coal and petroleum, and with the destruction of the green forests the emission of carbon dioxide in the atmosphere have increased rapidly. Large amount of CO2emission, along with the other gases are responsible for the increased global warming. In 2016, the five largest emitting countries which accounted for 51% of the world population, were the United States, China, India, the Russian Federation and Japan.. All of these nations together were responsible for 68% of the emission of CO2. Canada is itself responsible for the emission of 716 megatons of carbon dioxide (Olivier, Schure and Peters, 2017). The maximum of the carbon emissions result from the combustion of fossil fuels and cement production. The fee that has been levied over the combustion of the fuels based on carbon emission that include coal, oil and gas is termed as Carbon tax. It is basically a core policy that aims in the reduction and the elimination of the excessive use of fossil fuels which would help in stabilizing the climate and reduce destruction. The tax is mainly charged on fossil fuels based on the amount of carbon they have emitted during combustion. Imposing the carbon tax allows the consumers and the producers to enjoy a monetary incentive which eventually encourages them to trim down the quantity of carbon emissions. In accordance with this, the carbon tax proposals include exclusions for the businesses that are dependent on export, in order to facilitate them to remain in competion in the global market. The Federal Carbon Tax which comes under the Part I of the Greenhouse Gas Pollution Pricing Act (GGPPA), Canada, would be applicable over a person who would purchase fuel on a tax- exempt basis, if any individual burns the combustible waste in a listed province for energy production, or even if a person removes fuels from any covered facility. The tax rates for Canada are levied on a rate of $20 per tonne of CO2emission in the year of 2019. However it shall increase to $50 per tonne by the year 2022 (Liu et al., 2018). The imposition of carbon
2REGULATORY APPROACHES TO CARBON EMISSIONS tax is for the purpose of lowering of the greenhouse gas emissions. Imposition of carbon tax on the people encourages them to use alternative usage of energies. Thus it is cost- competitive with cheaper fuels. The carbon tax helps to raise the money that supports the different environmental programmes and also issue them as a refund (Makholm, 2015). This eventually helps in the progressive tax-shifting. Also the tax burdens are shifted from the federal income tax and the state sales tax. Since the carbon tax imposed by the government is a fixed price over the carbon, everyone must be paying it. It is relatively easier to administer and comprehend the policy as everyone pays the exact same price for the combustion of carbon. However apart from it advantages, it does have certain negatives. It does not set an exact amount on the emissions (Tietenberg, 2013). The price is just set by the government and the common public is expected to perform the rest of the activities. Canada is in a severe risk and the problem of carbon emissions is quite acute. Carbon trading is a process which is also aimed at effective control of carbon dioxide pollution. It also provides economic incentives in order to achieve the goal of emission reduction. Carbon trading is usually administered under the authority of any international organization or government. Unlike the carbon tax, carbon trading involves a set limit or cap over the amount of carbon dioxide emission. It is often called “cap and trade” (Filgueira et al., 2015). After capping the amount of carbon emission, a permit is imposed by the government over the companies specifying their limit of combustion. If any company wants to burn more carbon, than what is permitted to it, there is a requirement of it to seek extra permits from the other companies who have burned less carbon (Almutairi & Elhedhli, 2014). Cap and trade gives the government more mechanisms in order to target the cost to industry, not only the individuals. The advantages of carbon trading is that the government can have a dictating power over the exact amount of carbon and greenhouse emissions and have the authority to modify the sale of carbon permits in order to reach its reduction goals. However
3REGULATORY APPROACHES TO CARBON EMISSIONS it also does possess certain cons, apart from its pros. This policy is more complex than the carbon tax. The policy can also be violated by the companies. The companies can over report the amount of carbon emissions which would eventually lead the government to raise the permits and as a result the purpose of the policy would not be fulfilled. Secondly, the allocation of permits by the governments would result in the unfair and impartial results among the companies. There has been enough debate regarding which is the more preferred carbon emission regulations. A carbon tax is the fee that directly establishes the price over the greenhouse gas emissions (Goulder and Schein, 2013). Thus the companies and the firms are bound to pay the charged amount for every ton of carbon they produce. Thus the imposition of a carbon tax is more useful in order to reach its proposed aim of reduction of emissions. On the other hand, carbon trading or the cap and trade programme involves the issue of “allowances” or “permits”every year which can be subjected top auction to the highest bidder, creating a carbon price. The carbon tax on each tonne of emission of greenhouse gas is the most preferred choice (Xu, Xu& He, 2016). However, a hybrid combination of both the carbon pricing and the allowances of cap-and-trade programme might also be the best for a nation as it might satisfactorily achieve the emission reduction. There is a major advantage of the carbon taxover the cap-and trade programme and the hybrid version as well because it allows the certainty of the carbon price and has a less cost of administration. It also has a substantial source of revenue (Rozenberg et al., 2013). There might be other alternatives that can be implemented in order to diminish the emissions of carbon in the industry. Apart from the carbon taxes and the cap and trade, the emission of the carbon can be regulated by measuring the carbon footprint. Also reducing the energy use of the buildings and the industries can be effective towards the amount of carbon emission.The industry sector in Canada might certify buildings which will include the new
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4REGULATORY APPROACHES TO CARBON EMISSIONS technology of being energy efficient. There can be another method through which this problem of greenhouse emission can be reduced. The employees of the organization can be encouragedtousealternateoptionsofpublictransportlikecarpooling,bikingor telecommuting which would not allow the energy to be wasted, saving it and also reduce the emission of greenhouse gases. (Mildenberger et al., 2016). Even if there is a problem regarding the undertaking of new energy efficient buildings, there can be eradication of carbon footprints by the progress and the implementation of the alternative projects such as afforestation, solar or wind energy. From the above discussion it can be concluded that carbon trading and carbon tax are the two chief governmental regulations that have been imposed on the individuals and the industrial sector of Canada, in order to reduce the amount of carbon and greenhouse gas emissions from the country. The imposition of the carbon tax is preferred over carbon trading since it is a fixed monetary fee, whose payment is mandatory. On the other hand, the allowances of carbon trading might undergo discrepancy. However there can be other alternatives which the government of Canada can resort to, such as the introduction of new energy efficient buildings and encouraging the people to use carpools.
5REGULATORY APPROACHES TO CARBON EMISSIONS References: Almutairi, H., &Elhedhli, S. (2014). Modeling, analysis, and evaluation of a carbon tax policy based on the emission factor.Computers & Industrial Engineering,77, 88-102. Filgueira, R., Byron, C. J., Comeau, L. A., Costa-Pierce, B., Cranford, P. J., Ferreira, J. G., ... &McKindsey, C. W. (2015). An integrated ecosystem approach for assessing the potential role of cultivated bivalve shells as part of the carbon trading system.Marine Ecology Progress Series,518, 281-287. Goulder, L. H., & Schein, A. R. (2013). Carbon taxes versus cap and trade: a critical review.Climate Change Economics,4(03), 1350010. Liu, L., Huang, C. Z., Huang, G., Baetz, B., &Pittendrigh, S. M. (2018). How a carbon tax willaffectanemission-intensiveeconomy:AcasestudyoftheProvinceof Saskatchewan, Canada.Energy,159, 817-826. Makholm, J. D. (2015). Regulation of natural gas in the United States, Canada, and Europe: Prospects for a low carbon fuel. Mildenberger, M., Howe, P., Lachapelle, E., Stokes, L., Marlon, J., &Gravelle, T. (2016). ThedistributionofclimatechangepublicopinioninCanada.PloSone,11(8), e0159774. Olivier, J., Schure, K., & Peters, J. (2017). [Ebook]. PBL Publishers. Retrieved from https://www.pbl.nl/sites/default/files/cms/publicaties/pbl-2017-trends-in-global-co2- and-total-greenhouse-gas-emissons-2017-report_2674.pdf Rozenberg, J., Hallegatte, S., Perrissin-Fabert, B., &Hourcade, J. C. (2013). Funding low- carbon investments in the absence of a carbon tax.Climate Policy,13(1), 134-141.
6REGULATORY APPROACHES TO CARBON EMISSIONS Tietenberg, T. H. (2013). Reflections—carbon pricing in practice.Review of Environmental Economics and Policy,7(2), 313-329. Xu, X., Xu, X., & He, P. (2016). Joint production and pricing decisions for multiple products with cap-and-trade and carbon tax regulations.Journal of Cleaner Production,112, 4093-4106.