Cap And Trade And Carbon Tax Essay

The extent and causes of global warming have become an issue of argumentative political debate in major countries, for instants, China, the United State, India, and Russia who produced most of greenhouse gases (Brander, 2014). The temperature on earth has increase dramatically that caused by greenhouse gas or CO2 emission (Carbon dioxide emission is the greenhouse gas produced by human activities) is a negative externality problem that affects the world. Not only it damaged the atmosphere and cause of melted of ice from the north pole due to the changed of warmer weather that is significantly the main reason of natural disaster in the future but also impacts humans’ health. Therefore, it is governments’ responsibility to help companies produced lower carbon by providing regulation. Additionally, there are two different policies assisting that help reducing greenhouse gas; cap and trade and carbon tax. First of all, cap and trade system is requires companies to produce a certain CO2; under the regulation companies can buy and sell or trade from other companies. If the companies reduced in producing CO2, they will have capability to sell their unused portions to other companies. The greatest part of cap and trade is that it represents the effectiveness of controlling and limiting CO2 emission. Also, it helps government increases in revenue due to the credit that companies own would have to be pay to the government, and the more companies own, the more money government generated (Editor, 2015). On the other hand, there are some of disadvantages that occur when cap and trade system is being applied, for instant, risks creating an industry of deception. When the companies produced CO2 exceeded the limited amount, it is a possibility that companies will deceptive in their emission report because it can be expensive to buy more credit portions from other companies so they trying to avoid buying them (Editor, 2015) Secondly, carbon tax is a fee on greenhouse gas depending on how much companies produced. The benefits of carbon tax are encouraging alternatives, growing in revenue, and leading to efficiently outcome. Due to a higher price of carbon emissions and the higher …show more content…
According to USCAP Blueprint, it showing that cap and trade is the most economically efficient way that impact and reduce CO2 emission. By the reasons, cap and trade environmental outcome is guaranteed compare to carbon tax. Attributable to the setting of tax rate with the intention of reducing emissions by a certain amount would contain a lot of conjecture, it will need to be updated as economic change, and thus tax does not guarantee that targeted emission reductions will be succeeded. Additionally, cap and trade is an effective long-range planning associate with carbon tax. “While a carbon tax provides a high level of price certainty that facilitates long-term economic planning, cap and trade will always provide a price signal consistent with the ongoing cost of actually meeting the emission reduction targets”(USCAPs Issue Brief "Cap and Trade vs. Carbon Tax", 2009). Finally, it is an opportunity for companies when they can reduce CO2 emission because they can sell their unused credit portions of CO2 emission to other companies who struggling with the pollution problem, this can reduces the overall cost to society of the legislation, creating a more efficient system in economic terms (Editor, 2015). It is because of these effective outcomes that makes cap and trade so