Carbon Tax and Carbon Trade: Knowing the Basics

The ultimate question is now born as the results of the survey conducted by Hart Research showed that majority of the taxpaying population of the United States favors carbon taxation over the cap and trade program. Thus, the provisions of the American Clean Energy and Security Act which supports cap and trade scheme, would now have to be reviewed as the carbon taxation is deemed to be more straightforward and practicable.

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. A number of advocates say that this will greatly help curtail greenhouse gas emissions through setting market based price for carbon.

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? In general, the US taxpaying population regards the carbon taxation to be more straightforward and practicable over the carbon trading scheme. 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.

Compared to how it was in the past years, US politics have changed a great deal. What was thought of as highly certain is now put into question, which proves that a week is a very long time for changes to erupt in politics. 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.

Through a stable pricing scheme for carbon-based direct taxation, taxpayers would want to see corresponding tax reduction consequent to carbon reduction. It will be very crucial to neutralize the burden of taxation on energy costs, as it is expected that this will be the direct impact of such.

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. It is crucial for the company to be fully aware of the performance parameters of its assets to ensure that these are operating at least at optimum levels, not only so that it could attain energy efficient practices, but as well as sustainability.

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