Environmental Economics Carbon Tax Assignment Help
Environmental Economics Carbon Tax Assignment Help
A Carbon Tax is a tax imposed on carbon dioxide (CO2) emissions, including CO2 formed as through the burning of fossil fuels .Imposing of the carbon tax is one of the major market-based options to lower emission. Implementation of a carbon tax system is feasible, because the carbon content of every form of fossil fuel can be calculated relatively easily as is the amount of CO2 released into the atmosphere when the fuel is burned.
Advantages
There are a number of advantages that tax supporters promote over other carbon reduction schemes.
Carbon tax reduces consumption of fossil fuels. It is believed that the imposition of carbon tax would make people reduce the consumption of fossil fuel and shift towards renewable energy and would also promote research and development in the area.
This graph represents the economic effect of a carbon tax and shows how the tax level might best be set. The graph promotes the idea that carbon tax would be most efficient if set at a level that would reflect the marginal cost of abatement as well as the marginal damage costs of pollution.
Source: http://www.globalpolicy.org/images/s...lcarbontax.gif. Author: Professor Elizabeth Bogan, Princeton University.
Carbon Tax creates incentives for the development of clean energy and energy conservation. A carbon tax makes using fuels such as coal and oil more expensive, thus making renewable energy emitting less or zero CO2 more attractive (e.g., wind power and solar power). It also makes low-carbon fuels (e.g. biofuels), conservation behaviors, such as bicycling, recycling, and usage of "green" products more appealing to individuals. In addition, the more cost-competitive alternative energy under a carbon tax mechanism will lead to more capital investments in infrastructure, facilities and technology development in this field.
Carbon tax raises tax revenue. Imposing of a carbon tab raises the tax revenue for the government.
Carbon tax is more simple and stable. Compared to a cap-and-trade scheme, the price of carbon is predictable and stable in a carbon tax system. Businesses and utilities will easily know the price of carbon and its trend. They can make decisions on investments in alternative energy and energy efficiency programs accordingly.
Disadvantages
Carbon tax is politically unpopular. Carbon taxes are not very popular politically and many of the politicians have their reservations against it. It is also believed that the imposition of carbon credit might have adverse impact on the growth rate of the company.
Cap and trade programs have gained the recognition worldwide, which makes it difficult for the implementation of a carbon tax. After the implementation of the Kyoto Protocol, a global cap and trade program, the cap and trade system became well-recognized worldwide. In the United States, the voluntary cap and trade market – the Chicago Climate Exchange and a successful cap and trade program on sulphur dioxide emissions have made capped programs the norm.
Possible negative impact on consumers and economy: For poorer economies, imposition of a carbon tax might have serious impact on their growth and value propositions. It is thus not favoured by the poorer economies. For example, in 1990s, Ontario's long-running Fair Tax Commission rejected posing carbon taxes, arguing they would distort too many key sectors of the economy, manufacturing and transportation in particular.
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