A U.S. energy policy proposal called cap and trade is expected to reduce carbon dioxide emissions and thus reduce the impact pollution is having on the climate. However, cap and trade may be too little, too late. It is not that a cap and trade policy cannot work, but that it won't work fast enough. A carbon tax is often touted as a simpler and quicker way to reduce carbon emissions.
What is Cap and Trade?
Cap and trade proposals set limits for carbon emissions, but allow industries that produce more than the allotted amount of carbon to purchase the right to do so from other industries that pollute less. There are incentives for industries to reduce their emissions; their product and/or service will cost more, perhaps making them less profitable, or less affordable than other energy products. The cap and trade can be adjusted over time, forcing polluters to lower emissions.
Supporters of cap and trade say it is a politically viable solution, market-based and flexible. A marketplace for trading carbons has already been established, thanks to the Kyoto Protocol. There is also precedent for cap and trade style programs. According to the website Climate Lab:
- the Clean Air Act of 1977 traded emission certificates.
- the Acid Rain Program of 1990 created a market-based allowance trading system of sulfur dioxide emissions.
- Chicago established the Chicago Climate Exchange (CCX) in 2003, "a voluntary, legally binding integrated trading system to reduce emissions of all six major greenhouse gases."
Opponents of cap and trade call it "double speak". By allowing off-sets, which means a company pays the government for the right to pollute, the impact will be off-set as well.
The Carbon Tax
The carbon tax is a levy imposed on companies that burn fossil fuels, such as coal, oil and gas, and release carbons into the air. All other industries that use carbon but don't burn them, or contain their carbon emissions, will be exempt from taxation. Coal is the most carbon producing fossil fuel and therefore, would be taxed the most; natural gas, the least carbon producing fuel, would be taxed the least. The U.S. Energy Information Administration says, based on a tax of $100 per ton of carbon dioxide, the average cost of a gallon of gasoline would increase about $1.00.
Cap and Trade Versus Carbon Tax
The website, Climate Lab, reports the carbon tax may be a more effective solution.
- A carbon tax is a simple, more direct approach, which allows businesses and utilities to make plans based on the amount of tax placed on carbon dioxide.
- A carbon tax encourages conservation.
- A carbon tax promotes renewable energy systems and development.
- A carbon tax would result in a reduction in the building of coal-fired plants.
A similar plan, called "Cap and Dividend", proposed by Senators Susan Collins (R-Maine) and Maria Cantwell (D-Washington), sends tax revenue straight back to citizens.
The disadvantage of the carbon tax is its political unpopularity, the probable economic impact on consumers, and the world wide acceptance of global cap and trade programs as set forth by the Kyoto Protocol. As with cap and trade, a carbon tax is not a totally new concept. Finland and Sweden are among the several countries that have had a carbon tax in place for several years.
While there has been progress scientifically and technologically, politically the world is still left wanting. In the United States, energy legislation and its sponsors are in flux; internationally, the Copenhagen Climate Conference produced nothing of significance. Not until politics catches up with science and technology will there be significant reductions in carbon dioxide emissions.
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