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Carbon Tax Or Cap And Trade?

By Daniel Stouffer

Republish: EasyPublish™ Published: 02Jul2010 Word count: 677 Viewed: 344 time(s) Get Free Content For Your Site

Should the provisions within the Waxman Markey-inspired American Clean Energy and Security Act, covering the introduction of a cap and trade program, be replaced with a straight forward carbon taxation? This appears to be the opinion of the American taxpaying population in general, if we are to believe the results of the survey recently published. Hart Research, on the instigation of the US Climate Task Force polled over 1000 registered voters, the result being that a straight forward carbon tax appears to be much preferable when addressing climate change issues.

A cap and trade program calls for a central government to issue limits on the amount of carbon dioxide that can be emitted in any one calendar year. All entities that are responsible or contributory to that volume of carbon emissions must then enter into an auction-based program to purchase their individual rights to emit that carbon. Conventional wisdom says this will help to set a tradable price for carbon, which in the long term will drive down the amount of these greenhouse gases.

Should the provisions within the Waxman Markey-inspired American Clean Energy and Security Act, covering the introduction of a cap and trade program, be replaced with a straight forward carbon taxation? This appears to be the opinion of the American taxpaying population in general, if we are to believe the results of the survey recently published. Hart Research, on the instigation of the US Climate Task Force polled over 1000 registered voters, the result being that a straight forward carbon tax appears to be much preferable when addressing climate change issues.

When the EU Emissions Trading Scheme was introduced in 2005, environmentalists and government officials in the 27 nation European Union lauded it as the way forward. While the concept of "cap and trade" is not a new one, this was the first time that these concepts had been used to establish a major climate protection initiative. Depending on which side of the argument you fall, it has so far been either successful or a disaster and those against the idea of cite oversupply, volatility, insecurity and uncertainty.

Much has changed in the political landscape in the United States in the past year or so. As they say, even a week is a long time in politics and what was once thought to be almost a certainty is now being restructured. The cap and trade program envisaged by the House of Representatives is under increasing fire, and a carbon tax that directly targets the most polluting forms of energy is being suggested in its place. With such a highly contentious health care bill behind Congress, few expect that it will be possible to drive through major initiatives without at least some form of cross party support. As such, and with the Republican Party so against a cap and trade program, many expect efforts to be placed behind a direct carbon tax initiative instead.

If a stable price can be set on the cost of greenhouse gas emissions through a carbon-based direct tax, advocates want to see a corresponding reduction in the tax impact on ordinary citizens. A carbon tax would undoubtedly drive up the cost of energy, so it is important to neutralize that burden in one way or another.

American businesses should expect to be affected by a carbon tax in the future and should realize that it is in their best interests to cut back on the amount of carbon emissions that they are responsible for. By being proactive in this fashion they could even carve out an advantage over their competitors, who may not be aware of the looming issues, or may be slow to act.

Every asset within a company's operation is responsible for a certain amount of carbon emissions, as by definition it uses energy to function. When the company is fully aware of the performance characteristics of the asset and is able to ensure that it is operating with total efficiency, then it may be sure that is closer to meeting the demands of an increasingly critical public, in terms of sustainability.

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