Why Not Cap and Trade?

There is a call to limit carbon emissions in certain parts of the world such as China, the US, and Europe. Cap and trade or carbon taxation would both serve as disincentives to producing carbon emissions and should be considered as more people strive for opportunities to live in a more environmentally sustainable world. The cap and trade approach controls pollution by providing economic incentives for achieving a reduction in emissions of CO2. Carbon taxation involves an environmental tax as a disincentive by increasing the cost of CO2 emissions.  Many people advocate for a global carbon tax.

There are two major problems with having carbon taxation: inconsistent measurements and unfair punishment of the public and private sectors. Not everyone produces the same amount of CO2 and punishing only certain people or entities promotes inequity.  Carbon emissions are directly related to climate change, but not every country is willing to accept that it is their responsibility to pay the price of global warming when other countries or entities are not willing to act. It is difficult to point fingers when the cause of the problem crosses many borders in this globalized world. That leads to the following question: can an authority be created to regulate CO2 emissions in the world? Countries have their own laws and standards of living, which make it unfeasible to reach an enforceable global consensus. Also, in many parts of the world there are equality issues to resolve.

Taxation can also cause a negative reaction to the economy and markets, even if it has a positive effect on changing population behaviors. Carbon pricing may be perceived as unfair because it is difficult to target large entities when everyone who breathes is producing CO2. The intrinsic value of reducing CO2 to save the world for future generations does not have immediate payback except in the case of reducing costs by reducing energy usage. An economic shift can cause short term problems and be anti-efficient. For example, fuel efficient cars lead to states and federal government collecting fewer resources in gas taxes. If they tried to recuperate the money by taxing miles driven, they would remove one incentive to buy fuel efficient cars. Whether a mileage tax or a gas tax, it is hard to pass carbon taxation in the US. It is even more difficult on a global scale.

Another option to consider is cap and trade, which shows a better result in persuading people to do the environmentally responsible thing by encouraging people with monetary incentives. For example, C. Boyden, a lawyer, triggered the Clean Air Act of 1990 partly in response to acid rain – related emission trading system. This sulfur emission trading system was considered successful because, by the mid-1990s, sulfur dioxide emissions had been reduced by 3 million tons while the government contemplates cap and trade or carbon taxation, the private sector has come up with the LEED rating system, which is constantly improving and advocating for more sustainable buildings. Other programs such as the Green Built, Energy Star, and so on, also encourage people to be more sustainable. There is a reward in the form of companies and people having to pay less for energy usage. Currently, the Federal government is supporting incentives to lower CO2 emissions by offering FAA grants. In SeaTac, the Pre-Conditioned Air Project received part of its project cost ($18 million) from a government grant to produce an airport infrastructure design that has the potential  to reduce 50,000 tons of CO2 emissions and 5 million gallons of jet fuel per year. This incentive is efficient because it allows large entities to get funding to produce jobs, to encourage sustainability, and to reduce C02 without feeling the burden of taxation. If we had a cap and trade system, the market would create its own incentives.

In conclusion, cap and trade would be more effective than carbon taxation because it would rely on market forces. Carbon taxation causes negative association with punishment by the public and is difficult to enforce when the cause of the problem is difficult to measure and regulations against targeted entities can be avoided.  Also, the public in one country who has to pay the cost while other countries are not forced to pay would rebel against this kind of taxation. Cap and trade promotes sustainability by creating incentives to reduce CO2 emissions.


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