Data Structure
Networking
RDBMS
Operating System
Java
MS Excel
iOS
HTML
CSS
Android
Python
C Programming
C++
C#
MongoDB
MySQL
Javascript
PHP
Physics
Chemistry
Biology
Mathematics
English
Economics
Psychology
Social Studies
Fashion Studies
Legal Studies
- Selected Reading
- UPSC IAS Exams Notes
- Developer's Best Practices
- Questions and Answers
- Effective Resume Writing
- HR Interview Questions
- Computer Glossary
- Who is Who
Difference between Carbon Tax and Emission Trading Scheme
Carbon Tax and Emission trading schemes are policies to reduce carbon emissions through alternative ways by using market incentives to reduce emissions. Carbon Tax and Emission trading schemes are opposite sides of the same coin.
What is Carbon Tax?
A carbon Tax is a tax that is levied on the carbon emissions required to produce goods and services. Under this, the government sets a price the emitters must pay for each ton of the greenhouse gas they emit.
A Carbon Tax sets the price of carbon dioxide and enables the market to determine the number of emission reductions.
What is Emission Trading Scheme?
An emission trading scheme is a system used for controlling carbon emissions and other forms of atmospheric pollution that limit the aggregate emissions from a group of emitters by setting a “cap” on maximum emissions.
The emission trading scheme sets the number of emission reductions and it lets the market determine the price.
Difference between Carbon Tax and Emission Trading Scheme
The following table highlights the major differences between Carbon Tax and Emission Trading Scheme −
Factors | Carbon Tax | Emission Trading Scheme |
|---|---|---|
Profiteering | There are very few concerns. | Many companies reap vast profits for
themselves on the basis of how the
permits are designed and distributed. |
Emission
certainty | Taxes could be set at levels
where it is expected to deliver a
given reduction in CO2 over
time. For example, in good economic times, the industry as a whole or a few specific companies may decide to pay the tax and meet the market demand for products. | The firms can set limits on emissions
through the politicians may
continually back off from it. |
Price
predictability | The level of tax is fixed and the
businesses will know exactly
how much energy
purchase/consumption will cost. | The prices for emissions permits may
fluctuate in an open market, which
might cause some real planning
challenges in the business and lead to
emergency “changes” in the rules. |
Incentives and
investment | As the cost is fixed it enables the
business to make more informed
and confident business
investments to reduce the CO2
emissions, but the ROI will
depend on the level of tax. | As the overall cost of emissions is
more volatile, the investments in new
technologies to reduce emissions are
likely to be constrained by the last of
clarity about ROI. |
Overall
effectiveness | It is less subject to political
manipulation, but the level of tax
that is needed to make an impact
is not well understood in this
case, and it is also not clear if the
politicians are willing to go that
far anyway. | It is highly dependent on the details
of how aggressively the caps are
phased in, how the permits are
created and distributed, and various
other factors. |
Time
to results | In theory it could be
implemented way faster but it
would impact the behavior only
at levels the government would
fear to go. | It might take fairly long to set up all
the mechanisms and achieve the end
rustles. |
Conclusion
While Carbon taxes are way easier to implement and are less open to political challenges, the Emission trading scheme systems are more likely to provide appropriate pricing to incentivize the changes which are needed to combat climate change.
The emission trading scheme has one environmental advantage over the Carbon tax as it provides more certainty about the amount of emission reductions that will lead to a little less certainty about the price of emissions (which are set by the emissions trading market).
113 Views
