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[Ambassador report] [Thematic Report] Monetizing Emissions : Cap-and-Trade versus Carbon Tax

by Geumbee Ahn | 31-07-2021 23:59 Comments 5 recommendations 0



Wolf of Wall Street didn’t just give us Margot Robbie - it also brought us Leo Dicaprio as a blonder and squatter Jordan Belfort, who rephrased his spiritual progenitor Gordon Gekko’s memorable ‘greed’ salvo into a more panache-filled credo by saying, ‘Money is the oxygen of capitalism, and I want to breathe more than any man alive.’ Economic incentive has long been the staunchest impetus behind corporate action - without fiscal motivation, corporations rarely deliver out of the good of their heart. So then, perhaps it comes as no great surprise that the two foremost schemes designed by modern society to cut back on companies’ carbon footprints are actually two different ways of manipulating money to make CO2 emissions expensive.


Cap-and-trade energy programs are intended to gradually reduce pollution by giving companies an incentive to invest in clean alternatives. The government issues a set amount of permits to companies that establish a cap on allowed carbon dioxide emissions. Companies that surpass the cap are taxed, while companies that cut their emissions may sell or donate any unused credits to other companies or institutions. The net limit (or cap) on pollution credits declines over time, giving corporations an incentive to find cheaper alternatives before they begin exceeding the threshold and receive punitive taxation.


A carbon tax, on the other hand, is a fee imposed on businesses and individuals that burn carbon-based fuels, including coal, oil, gasoline, and natural gas, and produce greenhouse gases. A carbon tax is seen as reducing emissions by making it more expensive to use carbon-based fuels, therefore giving companies a reason to become more energy-efficient, so as to save money. A carbon tax also increases the costs of gasoline and electricity, therefore giving consumers a reason to switch to clean energy.


Critics of the cap-and-trade model argue that the program is a sure way to prolong the longevity of polluting facilities by allowing companies to delay action until doubling down on the polluting course becomes economically infeasible. Furthermore, they point out that treating carbon emissions as a giant ‘group project’ actually masks increasing carbon emissions in other areas. 


For example, in the state of California, the first and only U.S. state to implement a cap-and-trade system, most of the early emission cuts came from the electricity sector which cut its use of imported power from out-of-state coal plants. It was ‘low-hanging fruit’, as put by journalist Lisa Song of ProPublica, a cut that was enough to make up for emissions increases even within that sector; pollution from in-state power generation increased - but a move that will be hard to replicate in following years. In fact, Song reported that most facilities — 52% — increased average emissions within California during the first three years of cap and trade. These include cement and power plants as well as producers and suppliers of oil and gas. Because cap-and-trade tends to draw focus away from individual slackers and grade the emission quota as a whole, it is difficult to concentrate on penalizing the largest CO2 contributors - namely, oil and motor companies like Exxon and Chevron - and draws away attention from these companies’ slacking to temporary, unsustainable cuts in other areas.


On the other hand, carbon tax’s biggest problem isn’t the idea itself - it’s the application to paper that curbs much of its potential. When the U.S. state of Oregon attempted to round up its legislators to vote on a carbon pricing bill in 2019, Republican politicians fled the state to prevent the quorum necessary to pass the bill. When Australia instituted a modest carbon tax in 2011, things took a yellow turn very quickly: misogynistic invectives were hurled against Prime Minister Julia Gillard; angry protesters descended on the parliament building in Canberra; and climate-change denying opposition leader Tony Abbott castigated the country, accusing the government of “economic vandalism.” When he took office three years later, Abbott quickly rolled back the policy. In France a proposed carbon tax fueled the country’s yellow vest movement, triggering the worst domestic riots since 1968. The proposal was soon abandoned.


yellow vest.

5 Comments

Yuseon Mentor

  • Yuseon Mentor says :
    Hi Geumbee,

    This is your mentor Yuseon:D

    Thanks for writing an report regarding an important issue.
    Including carbon tax and carbon offset, many experts claim that monetizing emissions
    would be the best solution to reduce them. You have compared the two main methods, Cap-and-Trade versus Carbon Tax. I guess that cap and trade is a more broad method, and it is the company's responsibility to find their own clean alternatives, it might not be an easy system.

    Thanks for sharing your insight with us!
    Posted 15-08-2021 21:03

Paras Kunwar

  • Paras Kunwar says :
    Hello Geumbee,
    Hope you are doing great,
    Thank you for your report on cap and trade energy programs
    Keep writing,
    Green Cheers,
    Paras
    Posted 09-08-2021 15:35

Debbie Mentor

  • Debbie Mentor says :
    Dear Geumbee,

    This is your mentor Debbie :)
    I guess there are many parties against the entire policy of carbon tax? It's interesting how many politicians are not supporting environmental-based bills. Perhaps there are other related consequences that we do not see. Also I think it's sad that carbon emission related bills or terms can be manipulated as a means to earn some extra money. :(

    Green Cheers,
    Debbie
    Posted 02-08-2021 02:34

Asmita Gaire

  • Asmita Gaire says :
    Greetings Geumbee
    I hope you are doing well
    Monetizing emissions, very interesting and important topic and matter of concern
    Thank you so much for this report
    Keep writing
    Kind regards
    Asmita Gaire
    Green cheers from Nepal
    Posted 02-08-2021 02:07

Meena Pandey

  • Meena Pandey says :
    Hello Geumbee,
    Thank you for letting us know about Cap-and-trade energy programs and Carbon Tax.
    I enjoyed reading your report.

    I want to give you a kind reminder to fill this form which will take just a minute so that we can get connected in the coming days too.

    Form link : http://forms.gle/G2Qa9iXjhDXxcWcr9

    Yours,
    Meena

    GREEN CHEERS

    Posted 01-08-2021 11:02

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