Following the introduction, important terms will be defined. Arguments about the advantages and disadvantages of both approaches will be discussed briefly, followed by a closer look into some scholarly evidence.
Table of Contents
1. Introduction
2. Definitions
3. Drawbacks of Global Carbon Taxes (GCT)
4. Drawbacks of Emission Trading Scheme (ETS)
5. Evidences
6. Evidences of (Global) Carbon Tax
7. Conclusion
Objectives and Topics
The primary objective of this essay is to critically compare two major climate policy instruments—the Carbon Emission Trading Scheme (ETS) and a Global Carbon Tax (GCT)—within the complex context of the North-South economic divide, aiming to determine which approach offers better cost-efficiency and feasibility for global CO2 emission mitigation.
- Comparison of market-based mechanisms (ETS) versus taxation approaches (GCT).
- Analysis of administrative costs and implementation challenges.
- Evaluation of emission reduction effectiveness and price volatility issues.
- Examination of the North-South divide regarding climate change responsibilities.
- Review of empirical evidence from regional and national climate policy implementations.
Excerpt from the Book
1. Administrative Costs
it would be simple and straightforward to administer GCT since it could be incorporated to current fuel-supply monitoring methods that already exist (Aldy, Stavins, 2011). However, this argument is based on the fact that, tax would be set upstream. Stavins (2007) mentions that, upstream scheme include about 2000 energy supply companies which should be regulated whereas the downstream scheme would involve millions of regulation points because even the emissions of every households should be taken into account. Hence, GCT is only advantageous in comparison to ETS if it would be set upstream.
2. Emission Reduction: Under an ETS scheme, firms have an incentive to reduce the emission by switching to low emission technologies or at least investing in research and technology whereas in GCT, since there is only a rate of tax based on emission level, firms have less incentive to reduce emission. It does not guarantee a reduction and can cross the emission level beyond the limit set by environmental agreements (Goulder, Schein-2013). However, the evidence here is mixed. Despite the trading scheme, during the first phase of EU ETS, the emission level rose (Laing, 2013) and then only decreased. The decrease can also be partly attributed to economic recession. On the other hand, Aldy and Stavins (2011) found that northern European countries were successful in reducing the greenhouse gas emission despite having a Carbon Tax scheme. Still, a longer time horizon is needed to check the viability of each scheme.
Summary of Chapters
Introduction: Outlines the global phenomenon of climate change and the struggle between nations to find effective mitigation strategies.
Definitions: Provides foundational knowledge on the mechanisms of the Carbon Emission Trading Scheme (ETS) and the theoretical framework of a Global Carbon Tax (GCT).
Drawbacks of Global Carbon Taxes (GCT): Discusses the complexities of determining uniform tax rates and the risks of industry relocation due to competitive disadvantages.
Drawbacks of Emission Trading Scheme (ETS): Explores issues like governance capabilities, information asymmetry, and the potential for market manipulation.
Evidences: Reviews empirical results from the EU ETS, focusing on emission reduction and the promotion of clean innovation.
Evidences of (Global) Carbon Tax: Examines real-world national and regional examples of carbon taxation and their varied impacts on emission levels.
Conclusion: Synthesizes the comparison, emphasizing that both tools possess unique challenges and that a collective, financially supported approach is necessary for future success.
Keywords
Climate Change, Carbon Emission Trading Scheme, ETS, Global Carbon Tax, GCT, Kyoto Protocol, North-South Divide, CO2 Emissions, Environmental Kuznets Curve, Greenhouse Gases, Emission Reduction, Market Mechanisms, Sustainability, Climate Policy, Carbon Pricing.
Frequently Asked Questions
What is the central focus of this paper?
The paper focuses on comparing two major climate policy instruments—the Carbon Emission Trading Scheme (ETS) and a Global Carbon Tax (GCT)—to determine their effectiveness in reducing CO2 emissions.
What are the primary themes discussed in the work?
The work explores administrative efficiency, economic impacts on developing versus industrialized countries, price stability, and the ability of these mechanisms to drive green innovation.
What is the primary goal of the author?
The author aims to analyze which instrument, or combination thereof, offers the best framework for tackling global climate change while respecting the economic growth needs of developing nations.
Which scientific methods are utilized?
The study employs a comparative policy analysis, drawing on existing scholarly literature, empirical evidence from the EU ETS, and case studies of national carbon tax implementations.
What topics are covered in the main body?
The main body covers the definitions of carbon pricing, detailed pros and cons of both ETS and GCT, and an evaluation of empirical data regarding emission reductions and technology investment.
Which keywords best characterize this work?
Key terms include Carbon Emission Trading, Global Carbon Tax, Kyoto Protocol, CO2 mitigation, North-South divide, and environmental policy.
How does the North-South divide influence the proposed climate policies?
The divide highlights the conflict between the need for urgent emission reduction and the necessity of economic growth for poverty eradication in developing countries, leading to calls for financial support from industrialized nations.
Why is "upstream" taxation considered advantageous for a Global Carbon Tax?
Upstream taxation is seen as administratively simpler because it targets a relatively small number of energy supply companies rather than millions of individual downstream emission points.
What is the main advantage of an ETS regarding technology?
An ETS provides an inherent market incentive for firms to invest in research and low-emission technologies to optimize their permit usage and reduce costs.
Why is price volatility a concern for the Emission Trading Scheme?
Price volatility, driven by market demand and supply fluctuations, can de-incentivize long-term investments in green technologies if allowance prices drop too low.
- Citation du texte
- Bikal Dhungel (Auteur), 2015, Emission Trading or Global Carbon Tax? An Examination of Drawbacks and Advantages in both models, Munich, GRIN Verlag, https://www.grin.com/document/305980
