Carbon Pricing

Cap-and-trade system is used to tax CO2 emission

What is carbon pricing?

Where is most of the carbon dioxide pollution created? This is the question that many people suffering from the adverse effects of pollution ask themselves. The truth is that CO and CO2 are primarily created in industrial countries where most cars and factories are. However, these countries do not suffer as much from the disastrous effects of global warming.

Global warming hits the hardest in agricultural communities where the people’s source of livelihood and nutrition is mainly rainwater. These countries often do not have advanced irrigation systems and rely on rainwater to feed their crops and farms. As global warming causes droughts, these are the people who suffer the most.

The fairest solution is to charge the responsible countries for the carbon they are releasing into the atmosphere. Countries can put CO2 emission taxes on companies and factories that emit the most pollution. These taxes have several benefits that will be mentioned in the following.

Creating Consciousness

Taxing companies that choose fossil fuels as their primary energy source makes them more conscious of the harm they are causing to the environment. This consciousness gives companies the incentive to use more energy-efficient systems. Since the more carbon they release, the more tax they have to pay, the companies might find it more economical to invest in air purification systems.

Promotion of Alternative Energies

Why are fossil fuels more popular than solar or wind energy? Because it is more cost-effective. Fossil fuels are cheaper and provide more power than alternative sources, which is why most companies opt to use them. Carbon pricing makes the use of fossil fuels much more expensive than it is now.

The great point about carbon pricing is that the price of CO2 pollution is for the governments to set. These prices are determined according to the country’s economic situation and their income from the polluting industries. This personalized solution makes the taxing situation more acceptable for sectors. It also makes planning for the added income easier for governments.

Investing in Alternative Energies

Where does the extra money go? Companies have to pay their carbon dioxide tax to the governments, and governments must be obligated to use the accumulated amount on building the infrastructures for alternative energies. This money can be put into the construction of solar power plants and wind farms.

Carbon capture projects are another way that governments can use the carbon tax money. These projects include collecting CO2 from the atmosphere and storing it somewhere underground where it cannot harm anybody.

Which Countries are Enforcing Carbon Tax Laws?

The European Union

The European Union’s Emissions Trading System (ETS) is designed to force industries, oil trading companies, and airlines to pay tax for every ton of CO2 they release into the atmosphere. This system is implemented through a cap-and-trade system. In this system, the companies are allowed a maximum amount of CO2 they can emit every year. Within this amount, companies can buy or receive specific allowances of CO2 emission per year.

An interesting point about the cap-and-trade system is that the cap amount of emissions is reduced every year. Another issue is that the EU started the first carbon emission trading market in which companies are encouraged to sell their excess amount of emission allowance to others. This market has inspired many companies to reduce their carbon emission and sell their surplus allowance and use the income to further their carbon reduction systems.

Canada

Canada started its carbon taxing system in 2019. In Canada, every province or territory is free to set its own carbon price or use the fixed price set by the central government. The carbon pricing system in Canada includes two sections: the fuel pricing section and the performance-based emission pricing section.

According to Canada’s carbon pricing system, companies have until 2022 to prepare to reduce their carbon emissions. After that, a carbon tax is set to be $65 per ton in 2023. This amount is set to increase up to $170 per ton in 2030. What’s more, carbon pricing mandates provinces and territories to publish periodic reports. These reports contain information on the effect of their carbon pricing systems and the amount of carbon reduction.

Australia

The carbon pricing system in Australia started in 2012 and was set to have a fixed price in the first three years. After three years, in 2015, this system was converted to a cap-and-trade system. The governments are mandated to use the revenue from carbon taxing to build renewable energy power plants and infrastructures.

The final goal of Australia for enforcing the carbon pricing system is to reduce the amount of greenhouse gases by 80% until the year 2050. Australia has also set up three new government offices to oversee and implant the carbon taxing system all over the country.

Final thoughts

According to most experts, carbon pricing is only playing a side role in fulfilling the Paris agreement. This is mainly because it is hard to convince companies and industries to pay more money for energy without increasing the price and taking it out on the customers. In fact, companies place the customers, that is, the people, on the front lines of the resistance to fight the battle for them.

Complying with the carbon pricing system wholeheartedly requires time, culture, and the mentality to care about the environment more than your personal profit. Something that, sadly, does not exist in today’s world.

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Nadav Gover

Nadav Gover

Enthusiast, with Futuristic Mindset and Experienced in Online Marketing, Consulting, Real Estate, Online Entrepreneurship and many more.