Carbon Tax Or Cap and Trade?

By Daniel Stouffer

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.

The question of whether or not the provisions of the American Clean Energy and Security Act, which are Waxman Markey-inspired, should be replaced by the perceived straightforward carbon taxation would now be born? 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.

In 2005, when the European Union's Emissions Trading Scheme was introduced, government officials and environmentalists in the 27 nation EU pushed its 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. Those who are against the concept are concerned about volatility, uncertainty, insecurity, and oversupply when it comes to the argument on carbon trading as opposed to carbon taxation.

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. It is expected that there will be efforts that will be placed on the direct carbon tax initiative, as the Republican Party is also against the cap and trade program provided by the Clean Energy and Security Act.

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.

Business enterprises in the United States need to also expect impacts from carbon taxation in the near future, and it should be a main priority for organizations to curtail carbon emissions that are consequences of their production practices. 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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