The use of emissions tax is one of the most popular ways in which legislators, particularly the government have applied CAC. The carbon tax is one of such popular emissions tax. Generally, emissions tax is in place to ensure that a tax is levied on the pollutant content of fuels and other industrial products (Goulder and Parry, 2008). From the diagram below, it would be noted that emissions tax work on the basis of key economic models and principles.From the diagram, it would be noted that optimal abatement, which is the ultimate goal of imposing emissions tax is achieved at the dot where the marginal benefit and marginal cost curves intersect. To attain the level of abatement, it is advised or required to set tax to levels where marginal benefit equals marginal abatement cost. In the diagram, this is represented by the horizontal line named “tax”. Using the principle from the diagram, it would be noted that in whichever side, whether to the left of e* or right of e* the firm chooses, government benefits. This is because when they move to the left of e*, they will be choosing to abate emissions, which is beneficial. When they choose the right also, they will be paying more tax, which is economically beneficial. As a way of controlling emissions from the perspective of policy makers, the tax line is raised so that the polluting company will find it cheaper and cost benefiting to abate carbon emissions so as to keep marginal abatement costs lower than the tax.The European Union portal, EIONET (2014) defines a marketable permit as a permit that is issued from the government, allowing a firm to emit certain amount of pollution. This permit can generally be bought and sold, depending on the arrangement that the firms enter with the government. Marketable permits can be seen to be environmental regulatory schemes that enable the government to have adequate information about the sources of the pollutant and the effects of the pollutants so that the right form of regulations on specific tons of pollutants that can be emitted can be given. Even though governments have argued on the merits of marketable permits as a way of controlling environmental emission, there continue to be some theorists who debate the effectiveness of this, saying that as long as there is some form of permit, marketable permits only act as documented ways of doing the
EIONET (2014). Tradeable Permit. [Online] Available at http://www.eionet.europa.eu/gemet/development2/concept?langcode=en&cp=8564&ns=1 [22 April, 2014]
Goulder, L. and Parry, I. (2008) “Instrument Choice in Environmental Policy”. Review of Environmental Economics and Policy. Vol. 2 No. 2. pp. 152-174
Holling, C. and Meffe, G. (1996) “Command and Control and the Pathology of Natural Resource Management”. Conservation Biology. Vol. 10 No. 2. pp. 328-337.
Kelley, K. (2006). "City Approves Carbon Tax in Effort to Reduce Gas Emissions". The New York Reviews. Vol. 34 No. 4, pp. 45-66.
Perman, R., Common M., McGilvray J. and Ma Y. (2003). Natural Resource and Environmental Economics. Pearson/Addison Wesley: Boston.
The Cromulent Economics Blog (2013). ECON 101: An emissions tax. [Online] Available at http://www.env-econ.net/an_emissions_tax.html [22 April, 2014]
The Stern Report (2006). Stern Review: The Economics of Climate Change. [Online] Available at http://mudancasclimaticas.cptec.inpe.br/~rmclima/pdfs/destaques/sternreview_report_complete.pdf [22 April, 2014]
Tietenberg, T. (2006). Economics of Pollution Control, Chapter 15 in Environmental and Natural Resource Economics, 7th Edition, Pearson Boston.
Please type your essay title, choose your document type, enter your email and we send you essay samples