Capstone Project

Ohio is one of the states in the US that advocates the use of a kind of energy that does not cause any effects on the climate change. Due to the diverse effects of climate change many states have created taxes which will take care of the environment. Ohio is the first state in the US that rolled back clean energy mandates when they signed a bill that is called SB 310 to be a state law. The law was backed by deep- pocketed Ohio- based utilities as well as conservative groups. The bill came exactly a week after the EPA announced tough new rules on carbon emissions that were coming from power plants and other industries or factories. Looking at it closely, the impacts on consumers of a cap on carbon emissions are different across the income levels as well as in the different states of the US. This paper is going to look at the benefits of putting Carbon tax on Ohio State (Governor, 2014). The history of Carbon tax will be looked at in different levels and the ultimate role that it is playing in the state. In fact, pricing Carbon dioxide as well as other greenhouse gases (GHGs) is meant to address the market failure that is inherent in the state’s economy that does not price damaging emissions. Of course, audiences understand that much has been given on the design of a federal- level carbon tax. This paper is however going to try and adapt these findings to the state of Ohio having been motivated by the pending federal regulations that makes it an obligation for the states to have the regulations implemented. The State should have policy discussions with commitments that will lead to long – term emission targets as well as the state budget shortfalls that could help develop new revenue to the state.

Introduction Comment by William Doyle: Starts on a new page and is numbered with Arabic numbers!

Any state based carbon tax that is set above prevailing emissions allowance prices in state cap – and- trade programs and applied economy wide could be used to raise enough revenue to play an important and significant fiscal role in the state. This is because $20 per ton tax on energy- related CO2 emissions is known to raise around 2 or three % of GDP. The issue about taxation in Ohio largely depends on who is bearing the economic pain of the tax since the upstream producers as well as distributors will have to pass their costs to the ones who buy their products. Comment by William Doyle: Reference?

Thus, in Ohio, there is a system which maximizes coverage and minimizes the number of tax payers and coincides with the state tax reporting obligations. There is tax treatment on carbon that is embodied in fuels, on electricity as well as the goods that are imported from the state. The state needs to harmonize policies to avoid distortions on trade and investment. In addition, it is wise to determine how carbon tax can be featured in the state implementation plans so that there can be a Clean Power Plan and EPA rules under Air Act. With the introduction of Greenhouse gases (GHGs), there is a great disruption on the climate. Other than talking about air pollution and poisoning, it is good to note that the largest component of GHGs which is Ccarbon dDioxide can contribute to ocean acidification and hence, all the livestock in the water bodies may be affected (Q. Ashton Acton, 2013). Thus, when these emissions are released from their chemical compounds into the atmosphere, there are diverse effects that they can cause and the largest effects are suffered by human beings, animals both that are on land, air and water as well as plants in general in simple terms, the whole ecological system is affected in the negative way. Comment by William Doyle: Reference Comment by William Doyle: Clean Air Act? Comment by William Doyle: Do you farm animals, fish, all of the above? If you mean everything, choose a different word than “livestock”. Comment by William Doyle: What is the chemistry?

There are some areas where estates are not independent and they are entangled in the federal regulations on power plant carbon emissions thus creating action-forcing situations that may raise the appeal of a policy option that will cause many effects among them being producing environmental benefits and address some pressing fiscal needs. Other than carbon, other gases that are taxed include methane that comes from landfills and coal beds (Q. Ashton Acton, 2013). Comment by William Doyle: What do you mean?

In reality, the basic formula for taxation is quite universal and it is just simple and it helps in building on the three known fundamental components as well as a simple mathematical formula:

Tax X Tax Rate =Tax Revenue Comment by William Doyle: As written, this doesn’t make sense. Define what you mean by “Tax” and “tax Rate” “Tax Revenue” I assume refers to the revenue from the carbon tax rate.

When the tax is going to be generated from any form of energy products, it is energy related tax. It is clear that the tax base may differ according to the design of the tax (Kreiser, Andersen, Olsen, Speck, & Milne, 2015). Thus, for the carbon tax, the tax base can either be from the carbon content of the fuels that are concerned like Carbon Dioxide. This can make the tax to be limited to fossil fuels only like nuclear power as well as hydro power. At times, the tax can be defined in terms of the market price per unit of energy or at times, it can be defined in terms of volume of the fuel. When it comes to climate change situation, using CO2 or CO, the tax base will be the one to be likened since it offers a direct link to the environmental problem which is the emission of CO2. Comment by William Doyle: Either … or > What is the or? Comment by William Doyle: Poor wording

Most of the gases that are dangerous and poisonous come from combustion of fossil fuels as well as other effects such as global warming. It should also be noted that the cap- and- dividend would be able to return carbon revenue in exactly equal measure to each citizen in the state which is contrasted to the fact that the American Clean Energy and Security Act that was passed by the House of Representatives in June 2009 is said to be allocating revenues as free as free permits in a variety of ways as well as uneven effects across households. According to the Act, the Congressional Bbudget Ooffice of the same year estimates that under ACES, about 2/3 of the carbon revenue should be allowed to flow to households in the top quintile of the national income distribution (Bruins & Heberling, 2013). Comment by William Doyle: What gases are you referring to? Comment by William Doyle: Re-write this so that there is no underlining by WORD

In this sense, the visibility of the transfers of carbon revenue to the public may be more essential than the net distributional effects of the climate changes policy. The dividends to the public in the form of checks in the mail of even the bank accounts will offer higher physical profits to the families and households against what they can assume to be the effects of higher fossil fuel prices. Thus, the transfers from the ACES through the myriad routes like the capital gains to corporate shareholders as well as rebates in electricity bills will be less important (Ziemba & Schwartz, 2014). In fact, this is done so as to promote economic fairness in the state as well as state finance transparency. Transparency is also enhanced when the cap- and- dividend provides a way to secure durable public support for an effective policy to the weaning of the economy from depending on fossil fuel sources. In this matter, the state matters jump the boundaries to the whole nation matters, such as a proactive US policy which will be very important in reaching a better international agreement to confront the global challenge of climate change. Comment by William Doyle: ?

There are a number of gases which are involved in climate change and which are dangerous when they are emitted to the environment either to the air, land or even water bodies. The following are areas which are responsible for emissions in Ohio State: Comment by William Doyle: What gaases?

Transportation sector in Ohio accounts for approximately 32 percent of the total CO2 emissions, electric power generation is another sector that accounts for 35 % and is the largest source of CO2 emissions. Industrial end- use sector on the other hand accounts for 27 %, industrial use, agricultural production and others as follows; Comment by William Doyle: List these in a table and give the table a number and title and provide the reference for the information.

In 1990, the industrial processes emissions was less compared to that of 2008 that had been increased to 5.1 %. This increment is not logical owing to the fact that iron and steel production, metallurgical coke production has have also been reduced, aluminum production, electric transmission and distribution and even the HCFC-22 production have all been limited in the state. Although all the other productions have been reduced, cement production has been increased and this is known to cause an increase in the CO2 production. In addition, the use of substitutes for the ozone depleting substances which have rocketed from the small traces in 1990 and are slowly going up which is also leading to higher percentages of CO2 emissions in the state. An example is shown in the chart below; Comment by William Doyle: Poorly written. What are the numbers? What is the reference? Comment by William Doyle: What are the substances and how does it relate to CO

By the year 2008, solvents and other products only comprised of 0.1% of nitrous oxide gas emissions and although it is not that much, nitrous oxide gas is very dangerous and can be poisonous, possibly leading to acid rain (Governor, 2014).

The agricultural contributions come from many different angles of practices that are believed to make agricultural products better. For instance, the enteric fermentation in domestic livestock, from livestock manures management, from agricultural soil management such as burning of agricultural residues and even during rice cultivation (Geri & McNabb, 2016). In the current face of agriculture, the use of fertilizers is very common. The fertilizers all have different compositions which when they are emitted into the water bodies (which is where they end up) they cause diverse effects. In fact, in the whole of the US, agriculture is the largest contributor of CO2 emissions, accounting for around 68 % of the total emissions. Methane emissions are also known to have increased but since the number of livestock is being decreased due to a number of reasons, the methane emissions are also being brought under control. Comment by William Doyle: Make all CO2 to be CO2 throughout your paper. What is the reference for this paragraph? Comment by William Doyle: How do you know that and if true, what is the reason?

By the year 2008, landfills were the second largest source of emissions in not only in Ohio but in the rest of the US. Although there are new technologies which are being used and which are seeing the a decline of the CH4 gas emission, it is still having a high rate of emission and it is a big threat on climate change. The same is true about wastewater treatment in which case a number of chemicals are used in the treatment procedures. At times, it is hard to have the emissions brought under control since their uses can be approved, such as in waste water treatment, but since they are leading to more diverse effects, there can be other ways of water treatment that can be invented such that emissions can be reduced as shown below; Comment by William Doyle: Use CH4 throughout the paper. Comment by William Doyle: What chemicals are you referring to and what is the problem? Comment by William Doyle: Why do you say they are not under control? Are you referring to CH4?

While we tend to think that land managing is the best practice ever, it is better to note that there are some effects which they cause. For instance, forest management practices like tree planting and agricultural soil management can be some of the activities which lead to emissions. Land filling yard and food scrap are also activities which cause CO2 emissions which is ranging higher in the state. Reforestation is also known to cause an effect and contribute to missions and well as sequestration of carbon by urban trees that is ranking very high in the rates of emissions they make which accounts to almost 90 % as the years are also pushing.

Transportation

All the modes of transport apart from cycling and walking cause emissions. In fact, this sector needs to be looked keenly into in the state of Ohio, since it is the main cause of emissions (Bruins & Heberling, 2013). There are passenger cars which lightly account for about 33 %, there are also light duty trucks that account for about 29 %, freight trucks on the other hand account for almost 21 % and commercial aircraft which accounts for about 7 %. This sector is also seeing an ever growing increase in carbon emissions since the number of cars, trucks and even the motor cycles and aircrafts keep growing. Everyday movement is made by either of these modes of transport and the emissions are largely alerting. However, there is a chance to reduce these emissions in the transportation sector since the number of miles travelled per day has been reduced which is thought to have an impact on the emissions. The information can be represented in the following chart;

Looking at the analysis on the state Department of Commerce, there are different economic sectors that contribute to the production of carbon emissions and that the carbon emissions can have very intense effects on the climate and the environment in general. In most cases, manufacturing plants are a major contributing factor in this matter and the fuels they use undergo combustion to give rise to such dangerous and poisonous emissions (Laufer, 2012). According to the reported from the Department of Commerce in the state, industries have seen a decrease in the emissions in the past decade due to the fact that the use of electricity has been implemented and the matter is transferred back to the extraction and energy generating industry and not the manufacturing and production industries. However, it should be noted that the emissions varied across the industries since not all of them were using the same kind of fuel or even the same amount. Thus the size and the type of production as well as the fuel used brought out the variations in the amount of emissions they produced.

These gases combined can cause diverse effects on the environment. If they are not controlled in time, the whole world will be out of control. In the first place, global warming is a big threat not only in the US but to the rest of the world. The Ozone layer is fast thinning and the sun is becoming hotter and hotter by the day. The ultra- violet rays are also increasing their effects by the day and the effects are reaching not only human beings but animals of all sorts as well as plants. The water bodies are not less affected as the water can be acidifies which will make the living stock in water to have it hard to respire and eventually, they die. The whole ecological system is getting affected as so many animals especially those in water bodies are dying at high rates while those on land and air are lacking food due to lack of rain and other effects. On the other hand, there are some direct human health impacts which can be inferred to the people when these compounds are emitted into the atmosphere (Bartholomew, 2015). However, concerning the climate, there is a possibility that there can be photo chemical smog and acid rain. When acid rain is made possible, one can imagine the effects which can be experienced on earth, owing to the fact that, almost everything on earth is driven by rain.

There are many sources of emissions and they range from mineral extraction where fuel is used and after combustion, the air is more than polluted. In fact, different mineral extraction leads to different emissions but all of them have almost the same effects. In addition, the industrial and factory as well as manufacturing plants all use fuel at some point in their production line and the result is that air is polluted and it is poisoned. The effects extend to be causing factors of acid rain which in turn affects plant and animal life; it also leads to global warming. Thus, the taxation of energy plants range from energy extraction zones, industrial plants, manufacturing plants and all the rest of energy dealing zones. The energy exportation dealing is also taxed such that is a company is involved in extraction and exportation of energy, it can be taxed at both of these levels.

A policy that is known to limit the supply of fossil fuels is known to raise their price. In fact, the economic reasoning that binds the price to scarcity holds true, even if the cause of scarcity is not regarded. If the price is increased, the production is cut (Governor, 2014). If the lawmakers put a cap on the carbon emissions from the combustion of fossil fuels it can lead to increased prices. There is a contrast between high prices that are as a result of carbon cap and high prices that are caused as a result of different other forces. On one hand, the high prices that arise from a carbon cap are normally a burden to the consumers and it will not affect the general economy. They are transferred from the general economy to the consumers.

The extra costs that the consumers are paying normally go to the holders of carbon permits. It is clear that unlike price increasing as a result of market forces, the price increasing as a result of carbon cap is known to recycle the dollar not only in the state of Ohio but in the whole of the US. When these happen, there are three agencies which benefit;

· These are benefits to corporations especially if the permits are given to corporations without any pay.

· Most firms which are energy dealers and their shareholders will also get to benefit

· It can also be a benefit to the government since the permits will be auctioned and not just given away and the value of the permits will be offered back to the government as profits (Governor, 2014). On the other hand, the money can also benefit the general public, but it will depend on what the money is used for public expenditure or even cutting taxes and thus, the person who is going to benefit from this money will largely depend on his relationship with the tax in place and what the cash is used for and how.

There is a great possibility that the consumers will be either partially or even fully insulated from the impact of high prices especially if the revenue from permit auction is given back to the public as equal per capita dividends (Laufer, 2012). The household that have small carbon footprints will have more dividends than they are paying higher prices. This is a policy that is called a cap- and – dividend policy. It is approximated that in the next forty or so years in the future, the value of permits under a cap will amount to trillions of dollars, then its mechanics (mechanics of cap-and-dividend A carbon cap) will be administered upstream without any challenges and with the need of permits which are supposed to bought by the first sellers of fossil fuels into the state economy.

The cap is meant to reduce the supply and raise prices of fuels, and the result is that the market signals will spur and household and families will start investing in clean energy. In most cases, the cap- and- dividend policy, the permits are auctioned by the state government and almost all the revenue from the permits is given back to the public in terms of equal payment per person. It’s name according to the economists is a `feebate’ arrangement, which means that individual persons pay fees that is based on their use of a scarce resource that is owned in common and as a community then the fees is rebated in equal measure to all the co-owners. The fee is set by the carbon footprint of the household and the owners in partnership are all the people of the state.

Dividends can be disbursed through ATM cards such as those used in almost all the states to get access to Social Security funds. When they go to the ATM persons are able to check the auction revenue that was deposited in their accounts and they can also withdraw cash when they like. In Ohio State, auctions can be held monthly or even quarterly when the number of permits that are to be auctioned being reduced slowly as the carbon cap becomes tight over time (Agriculture, et al., 2014). This can help the holders to bring fixed quantities of fossil carbon into the economy of the state in a given time such two years from the real date that purchases are made. The firms will only be able to buy the permits that can be auctioned, bearing in mind that permits cannot be traded. There is no permit in fact which can be sold, ranging from driving permits, gin permits, landfill and disposal permits and even parking permits cannot be bought or sold in markets, since they have legal concerns which and names which cannot be transferred in any manner to another person.

There is a big need for firms to be balanced when it comes to receiving permits. Since all of the permits are given free of charge, their needs is based on a given formula such as historic emissions so that no firm gets more than they need nor there can be another that will have less than they need. Thus, trading is very essential to redistribute them from one holder to another. If for instance 100 % of carbon permits are auctioned then permit trading will not be needed.

Trader profits have not been known to drive a wedge between the amount paid by consumers in higher prices and the amount of available revenue that can permit sales. There is no carbon revenue that can be siphoned off by speculators or trading firms. There are times also when non-tradable permits can safeguard the policy from the perception or the reality of market manipulation by the stakeholders who are seeking to take part in the system. Dividends against other uses of carbon revenue other than returning 100 % of carbon revenues to the public, the policy makers could allocate some revenue to some other uses within the state such as investing on clean energy, offsetting the impacts of higher fossil fuel prices on the purchasing power of the state. The transitional adjustment aid to workers, communities or even firms that are adversely affected by the transition away from the fossil fuels as well as other government expenditure, the tax cuts or the reduction of deficit and therefore, a step should be taken to ensure that all is in place.

Tax is the only alternative way of putting a price on carbon. In this sense, carbon tax can be defined as a permit with a fixed price (Bartholomew, 2015). The cap – and- permit policy sets the amount of permits that need to be emitted and allows a determination of the permit price. In carbon taxes, higher prices offer a market signal that encourages energy efficiency as well as investment in alternative energy. Therefore, the policymakers have a responsibility to oversee the future demands of fossil fuels bearing in mind that there will be new technologies that will be available and if the economy will zoom towards any direction, thy will be able to achieve results that are good. It is upon the policymakers to determine if they want to set the quantity of permits or to set the carbon price. However, it is not easy to predict the future demand on energy since there are so many uncertainties about the demand in the future. Thus, the relationship existing between quantity and price will not be predicted as well.

The ultimate and paramount aim of climate policy is to reduce emissions so that not only the state of Ohio but all the states of America should reach the 2050 target. A convincing case needs to be made so that the right quantity is got and the right number of permits is set so that their prices will be varying according to their demand. It is also good to note that at times, politics may be a major contributing factor to reduce the carbon tax to be too low basing their decisions on the optimistic projections of the resulting emission reductions (Marien, 2013). The politics can also influence the undermining of the efficacy of a cap- and- permit policy, happening in two major ways;

· In the first place, they can set the cap at a level that is inadequate and which will not enable them to achieve the set emission reductions

· Secondly, they can allow `offset’ where instead of curtailing fossil fuels firms are given credits for other actions like planting trees, slowing the rates of deforestation or even reducing carbon emissions not only in their states but also in other states and in the whole of the US (Kreiser, Andersen, Olsen, Speck, & Milne, 2015).

Then, the permits case rather than taxes is premised on a very tight cap which can reduce emissions so as to meet the 2050 target. In the case where policy makers choose to go by the carbon tax, there will be a challenge of revenue distribution.

One of the major areas where people suffer is in payment of taxes. If the revenues from carbon pricing can be invested in this sector, then it can fund cuts in other tax rates. The taxes on labor as well as capital can reduce the income of persons and businesses and will eventually decrease incentives to engage in productive activities like in work and investment. All these taxes are different from carbon tax that helps to correct market failure and can also reduce the incentive to reduce emissions that come from greenhouses.

Likewise, the revenue that is got from carbon pricing can be returned to households and families through the lump sum payments that is normally divided equally to the citizens. At times, alternate metrics is used to divide the money but they have to ensure that each household gets that sum. Because of the fairness and the simplicity involved in the tax- and- dividend approach, it has gained popularity and it is the most common approach used in distribution of the revenue that is taxed from carbon pricing. The households in the state are either given the tax refunds or they are sent quarterly or annual checks. At times, the approach ensures that low- income households receive more income as they spend on tax.

The large national deficits are known to reduce the economic rates by increasing interest rates and inhibiting the private sector investments. This will then increase the future tax burdens to make pay offs especially on the principal or even on the interest on the debt. With the revenue from carbon pricing, the annual deficit can be reduced and the diverse economic effects caused by the large deficit rates could be brought under control.

The revenue from carbon pricing can help in stimulating the innovation in low- carbon technologies such as renewable energy that is becoming very common in other states and even in the whole nation. In addition, carbon pricing can offer revenue that can be helped in promoting the development and development, deployment and the deployment of breakthrough technologies that will see to the fact that the climate is well conserved and managed (Davis, 2014). There is also a need to invest in infrastructure that can help communities adapt to the effects of climate change that are now unavoidable such as extreme weather in terms of scorching sun, waves and sea level rise.

There are some persons in the state that are mostly affected by the carbon price. For instance, there can be job training in the industries where there are anticipations of losing jobs such as coal mining industries. There are also some households, businesses and regions of the state that are entirely dependent on production and consumption of fossil fuels in order to smooth the transition to a lowed carbon economy. These revenues can also be utilized to offer assistance to industries that face an increased competition from foreign competitors.

An establishment of carbon pricing program needs a number of decisions on the policy structure as well as the design. The following can be used as the basis of decision making regarding carbon pricing. It is good to note that each of the elements is relevant to both sides of carbon and tax as well as a cap- and- trade program;

This refers to the portion of overall greenhouse gas emissions that are covered by a program. In order to make a decision on the scope, there is a need the policy makers to decide on;

· Whether the program is going to only cover CO2 emissions or whether it will also cover other greenhouse gases

· The economic sector that the program is going to cover

· If all the emitters are only the ones that are above a certain threshold of emissions are regulated or if they are basically not regulated.

In most cases, if the scope is broad, then there is great expectation that the reduction of emissions will also be great from a given carbon price. In addition, a broad scope means that a certain quantity of emissions reduction will be achieved at a reduced cost.

There are different points of the economy that carbon pricing can be applicable. In an upstream approach, the carbon price can be applicable when the materials that will lead to emissions first enter the economy, such as at coal mines, at the oil and gas drilling sites or at the entry points of fuel imports. This approach is known to allow a big fraction of energy carbon di Oxide emissions that should be covered while at the same time regulating few entities (Bartholomew, 2015). On the other hand, a down- stream approach will be applicable to the carbon price at the exact points where the emissions occur. This can then be applied at power plants as well as at manufacturing areas. At times it is hard to have it applied to personal buildings, cars and even trucks. Even so, an integrated approach can be used which is a mixture of both the upstream and downstream approaches. Examples where an integrated approach can be used is in oil refineries and well as in natural gas processing plants.

An established emissions reporting and verification system will be a very good way to carbon pricing decision making. Although reliable reporting systems are in place in many areas, it should be noted that the addition of carbon price creates direct economic effects for both of the recovered areas and this may be known to reduce the tax burden. There are many given ways in which verification can be mad possible, ranging from independent third party verification to self- certification that has very strong penalties.

Carbon tax and cap- and- trade programs need that there is setting of prices and emission caps. By setting the tax level or the cap level needs that there is a balance from many considerations including from the political, economic, environmental and even legal grounds. In the climate change perspective, it is right to begin from any of the considerations that are targeting emissions from the estimation of the arrears caused by GHG emissions. On the other hand, the non- climate policy priorities such as tax reforms, there may be a given amount of revenue that is needed in order to set the price. Thus, it can be easy to increase the stringency of a given program slowly over a given period of time to adjust the price or the cap in case conditions change. The many other factors that are to be considered include allowing offsets such as the emissions from entities that are indirectly, by the policy. For instance, the enhanced carbon sinks that are achieved by tree planting can help in reducing the costs of a policy, but it can also make it hard to have emissions reduction. Lastly, the policy makers are supposed to look at the broad policy context where carbon pricing is introduced that includes a complimentary policy that may be required to reduce the emissions even further (Marien, 2013).

It is also important to note that the price or a cap is not going to be a single number, but it is supposed to be a trajectory which means that it will have an increasing tax rate or even a declining cap over a period of years or decades. Thus, as much as all the factors are to be taken into consideration, they should show a given balance in terms of politics and economy so as to try and ease economic transition aiming to start a low price and allowing the price to go up over a given time so that emissions can be reduced. Together with the rest of the States in the US, Ohio State has set a 2020 target in which it aims to completely offset the carbon emissions. If these rates are achieved by this time, then they can be the basis of trajectory of emissions caps and modeling can be made possible especially in the estimation of the resulting carbon price or even to offer a suggestion of a perfect carbon tax trajectory. On the other end, the long-term targets such as that of 2030 and that of 2050 can be brought under use as well.

At times, it becomes hard to look at these matters into the future, especially making the targets work. For instance, translating between carbon prices and emission levels on a long term period is not really practical. Whether the determination of the effects and consequences of the emissions over time of a given tax system or even the prices that will be as a result of a carbon cap is hard to predict due to a number of future uncertainties that are involved in trying to model long- term developments in the economic energy systems. In reality, setting a carbon price based on damages that are brought about by climate changes are aiming at ensuring that the full costs of climate change are included into the prices of carbon intensive products and goods and even the services that are related to carbon.

Looking at the federal government of the US, they have made estimation to the `social cost of carbon’ so that they can gain insight into a key economic question and what damages are created by increased carbon missions. Many countries within Europe and outside have also followed suit so that they can take collaborated efforts in reducing the carbon emissions. This is majorly driven by the fact that when the effects are suffered, it is not Europe alone that will suffer but it is the whole world. For instance, if the ozone layer is affected such that it undergo extreme thinning, all the countries and in fact the world will be affected. Thus, the attempts of SCC are to possibly identify and quantify the impacts that climate change could bring for centuries in the future (Bruins & Heberling, 2013). The impacts are known to have negative effects on public health, infrastructure and even the environment. In addition the impacts should be translated into monetary terms and it is not counted on the present value so as to evaluate the cost of increasing emissions in the present value of cash. In the national government, the Office of Management and Budget has given direction to the agencies involved to make use of SCC estimates in knowing the quantity and the intensity of the benefits of reducing carbon emissions as part of their regulatory consequence analysis.

In most cases, the resulting estimates of SCC are very wide because of the main risks surrounding the impact of estimates and owing to the fact that the estimates are only approximations and they cannot be relied as the actual figures. This is also supported by the fact that there is no enough information that is needed to translate given arrears into monetary values (Governor, 2014). For the decision makers and policy makers that are motivated by the need to look at climate change available for given policy purposes like the payments to be made on reductions in payroll or the corporate tax rates or even provision of funds for infrastructure offers an alternate approach used to determine the level of carbon price. Modeling is needed in order to get the level of price and its trajectory over time to be right. In fact, if there is certainty in setting prices in carbon tax, the impact of the price on the future emissions and hence the revenues in the future need to be modeled. On the other hand, if for instance the level of emissions will come low faster than the price could rise in a given time, then there could be a decrease in revenues collected. On the same side, the net government revenue can be impacted in any of the program adapted by the extent of the tax payments of even the allowance sales deductible business expenses.

The program to be adapted should include a price that is going up or a cap that is going down over a given period of time. If there is a price that is starting low and increases in a way that is predictable for a relatively long period, then the current economic effects of the policy on the present activities that are muted since the industries as well as the consumers can over time adjust to the carbon prices. Then, there will be a signal that is sent to the economy; that the continued emissions will be costly in the future years. At times there can be a shift in investment as well as the economic activity which needs to take into account the future costs and revenue streams. On the other hand, a decreasing cap operates in the same way, although with higher risks (Governor, 2014).

Policymakers need to make a balance on the objectives of competition especially on maximizing emission reduction. Reduction of emissions can prove expensive than what is expected; the result can be that the economic and the environmental outcomes vary from predictions (Marien, 2013). For instance, when it comes to EU ETS as well as the RGGI, changing the levels of economic task is possible and the decreased natural gas prices that is meant that the emission levels are below the caps. This is especially true with the RGGI. The EU TS as well as the RGGI have however moved to reduce their caps in the near future phases and or delay auctioning of allowances so as to be able to address the unexpected low level emissions. However, if the emissions reduction is expensive than or if it is hard to afford, a tax can result in lower emission reduction that the anticipated or a cap- and- trade program may experience higher allowance prices. Unexpected situations may also result to high prices in a cap- and- trade program or a minimized emission reduction that result from a carbon tax. Expecting these situations argues for inclusion of an adjustment mechanism in the original program design that is meant to minimize the ability for a disruptive and unplanned changes or a cost maintenance mechanism.

In matters of confidence, price stability offers an important measure, especially for those investing in emission reduction as well as clean technology (Agriculture, et al., 2014). For instance, in a carbon tax, this is one of the aspects of the program. In reality, cost- containment mechanisms are known to deal with concerns about severe price, fluctuations in a cap- and- trade program. In case the prices increase so much in a short time, they can result in a crucial economic harm. On the other hand, if they become too low, they can offer desired price signals for the low- carbon investment. In most design options, the decision on if or not to include cost containment mechanisms involving trade-offs that are discusses below for offsets and price ceiling.

These are documented emission reduction that occur outside the regulated sectors and can be used by regulated entities in lieu of emission reduction that is covered by the system. It is clear that offsets can be positively used in order to reduce program costs since any regulated entity will make use of offsets when they are less costly that the covered emission reductions. Even so, the results that will be achieved are the same. In addition, offsets can offer a way to bring into the program any sources that are hard to be directly addressed. For instance, the overall emissions that are coming from agricultural investments are quite hard to quantify and even verify, however, when it comes to individual actions such as manure management, then it is easier to handle it.

Offsets are normally in most cap- and- trade programs, but they tend to be looked at as being controversial since concerns on whether the offsets represent emission reductions that would not have been experienced. Whether to include offsets depends on the intensity of trade- off between the lower compliance expenses and the certainty of getting to the environmental objectives. This is because climate change is the main issue that is looked here and therefore, it should be given a priority. The inclusion of offsets is an undermining factor to the uncertainty especially when there are concerns on whether the associated emission reductions are valid or not (Governor, 2014). In most cases, offsets are more involved in cap- and- trade programs than in the carbon taxes, even though they can be integrated in either of the programs. On one side, the offset credits can be used under the cap – and- trade to cover emissions the same way that allowances do. On the other hand and under the carbon tax, regulated entities can be allowed to make use of offsets in order to reduce the quantity of emissions. This can come in terms of the quantity of fuel or any other cause of emissions, in which case the tax is assessed. Each of these uses and in either case, there are rules and regulations that establish definitions of offsets that are valid and their limits on their use; that is if they exist.

In simple terms, a price ceiling sets a limit on how high or fast allowance prices can rise while price floors sets the limit on how low the prices can fall, and when they are used in integration, they form a collar. Price ceiling and floor are relevant only in a cap- and- trade programs and when it comes to programs such as carbon tax it increases the certainty regarding future prices. It should be noted that a given program may have a ceiling, a floor or both (States & Administration, 2012). Ceiling is meant to prevent economic disruptions from very high carbon prices and from prices that rise so fast. It can be caused by higher emissions over time because the core response to hit ceiling is likely to be an increment in the allowances related to supply. On the other hand, a price floor is used to prevent the total collapse of the carbon price and make sure that clean energy investments are at least supported by a given minimum carbon price. The demerit of price ceiling and floor is that they cause inefficiencies in the markets for emission allowances. It is the wish of the buyers and sellers to decide on what price they can us and they can choose between the prices higher than the ceiling or lower than the floor, but this is not legally allowed. It is better that the policy makers make a ken decision on whether there are any benefits on the costs in the market inefficiencies and from their decision, they can decide on which price tag they can use.

In real, a price on carbon can be a key factor of a broader climate policy since it offers crucial signals through the economy that approves a shift to lower carbon energy and other carbon products. Other policies however are required in order to aid a lead to cost- effective way to deep greenhouses gas emission reduction in the future. Some of the complimentary policies include;

A single program in carbon pricing will not be able to address all the sources of greenhouse gas emissions since some are far dispersed or they can be hard to measure and quantify and therefore, if they are included in the program, it can be a total burden on the administration (States & Administration, 2012). Thus, there is a big need for other approaches to come in in order to reduce greenhouse gas emissions throughout the economy and to encourage reduction from sources that are not covered by the carbon price. Some of the approaches that can be helpful are offset programs that allow crediting of emission reduction tasks investments in R&D, incentive programs and even in direct regulations.

This policy has a number of documented market barriers like split incentives that exist between building owners and tenants, lack of proper information which hinders the achievement of a full range of cost- effective opportunities. Thus, the application of a carbon price will help in strengthening the market signals and offer incentives for additional energy and they will not be responsible for market barrier removal. Thus, so many programs that presently offer incentives to efficiency may be needed even if there is carbon pricing policy. The best thing in this is that revenue from carbon can be used in expansion of these other approaches such as in the case of RGGI program.

Carbon tax or the cap- and- trade program are thought of as being cost effective in achieving emission reduction than other traditional regulations and standards when it is assumed that the relevant markets such as energy efficiency and innovation, functioning in an ideal of competition. For the proposers of carbon price and to those who see the policy as leading to meeting of policy goals, avoiding these regulations and standards might be seen as an objective to implement the carbon price. It should be noted that at some occasions, the carbon price may not be very effective of reducing greenhouse emissions than other policies. This is because markets may not be perfect and prices may not be effective.

In fact, a number of emission reduction approaches are not independent and they squarely depend on other technologies that are likely to be influenced by the carbon price in one way or the other. This can be attributed to the same market barriers that hindered energy efficiency investments. For instance, technical upgrades to the state grid can possibly lead to an increase in the contribution of power from the distributed electricity generation sources not forgetting renewable. In this regard, a carbon price will not by itself offer enough incentive for investment in the grid since any little benefit from the increased distributed power generation will not accrue to parties investing in the grid. Therefore, if there is public investment in infrastructure as well as other enabling technologies, then there can be a significant emission reduction opportunities across the economies.

In order to reach and to achieve the goals and objectives that are set in the long term planning on matters to do with energy, there is a big need for technological innovation and advancement. Increased rates of research and development will help to reach these desired standards. In fact, it is even anticipated that if there is deployment of new and improved technologies, there can be a reduced cost of achieving long- term emission goals.

The carbon pollution in the state can be expressed in two main ways; as a mass-based limit designating a maximum number of tons of CO2 that can be emitted by covered plants and by allowing load growth over years as well as a rate- based limit that can be best expressed as a number of pounds of Carbon dioxide per megawatt or Mwt of electricity that is generated from the plants that are covered for each given time frame (Marien, 2013). Ohio utilizes the mass- based standard to reduce its carbon pollution from all over the power plants from 102.2 million short tons in the year 2012 to figures below 74.6 million by the year 2013.

If this figure is achieved, it will be an equivalent of avoiding carbon pollution from more than 5.2 million cars. By the limitation of pollution, the state of Ohio will have benefits from the expansion of its clean energy sources such as renewable energy sources; it can also be able to add jobs to its clean energy economy which is currently holding 89,000 workers. EPA clean Power Plan is meant to reduce the while nation’s carbon pollution mainly from the fossil-fueled power plants by 32 % by the year 2030. The reductions will be as a result of making improvements in the coal plants such that there are not much carbon emissions or there can be coal retirements as well. In addition, there can be increased dispatch of the existing gas plants and most importantly, the increase in use of clean energy.

The following table can be a summary of the information above;

Renewable sources and energy efficiency can be used in clean energy. In fact, if there is investment in energy efficiency as well as renewable energy, carbon emissions and pollution can be cut down and this can help stimulate local economies across the state and it can too create paying jobs (Agriculture, et al., 2014). The Ohioans who are working in the clean energy sector will get a yearly salary of % 3500 higher than the median salary in the state.

According to dependable sources and research conducted on the state, Ohio attracted about % 1.3 billion in private clean energy for a period of four years starting from 2009 to 2013, which is an indication that by the year 2030, the state could have attracted over % 3 billion. Clean energy is a way or reviving the state’s manufacturing sector by creation of trained and skilled labor force which is believed to lead to development, installation and maintenance of wind and solar energy resources. If carbon pollution is curbed totally, not only will the state of Ohio but also the whole nation will have a better health as well as better environment that will also make living better for the full ecology system. There are a number of health problems that are arising from climate changes in Ohio. For instance, flooding that is closely related to drinking contaminated water which is as a result of extreme rainfall events like acid rain (Agriculture, et al., 2014).The rising temperatures also lead to increment of ground level ozone smog making it very hard to breath. In Ohio State alone, reduction of particle pollution could lead to saving 2800 lives and prevention of 760 hospitalizations in the state by 2030.

There are three policies which can be used to reduce carbon pollution;

i. In the first place, there can be significant pollution cuts at very low costs using energy efficiency and renewable energy. Energy efficiency is known to be the most cost-effective choice owing to the fact that clean energy investments are thought to be the best especially in reducing customer energy bills. For example, if a person is using solar energy, there is no cost or bill that is to be paid the same the bills are paid when electricity is used.

ii. Since regional approaches that create more trading markets reduce costs, the state makes use of the policy and trading such as from developing a regional plan to writing persons the plans which have common elements as well as trading across borders. In addition, regional consistency can help in reduction of market distortions and pollution leakage across borders. This is also known to reduce pollution rates in the state.

iii. The mass-based approach is known to be the lowest- cost policy option in that the allowance value or the permit revenue is given off by those who participate in the pollution process and the revenue is re-invested for the benefits of the customers. All these approaches are simple, they have lower costs and they have all been tested. In addition, they are well known for their high environmental integrity and they can easily be interconnected across the state borders and regions. However, since the mass- based approach is paired with crucial, complementary clean energy policies, it can serve to fulfill all the criteria outlined and therefore, it is taken to be the best option of the three.

It is true that we are not able to predict what the future has, but all the same, something must be done. This is the main reason why policymakers, stakeholders of all sorts and other key shareholders have highlighted many factors that can be combined in order to increase the appeal of carbon pricing policies such that the carbon emissions can be utterly reduced (Toensmeier, 2016). Some of the areas which can be handled include;

· Bipartisan support for tax reforms

· A successful carbon pricing program and approaches at the state level and this can include ability for more programs and approaches which combine effort and which spur compliance with the new EPA power plant standards

· Creation awareness to the general public on the impending danger and impacts of climate change so that each and every person acts in a responsive way in reduction of emissions.

· Clearly stated goals especially aiming at deeper greenhouse- gas emissions

· A strong desire for an alternative approach to regulate carbon emissions so that they can be brought under control.

It is also true that the state may have flexibility on decisions making on reduction of pollution and it should be understood that the benefits aim at making the environment better, improve the economy and a benefit to electricity customers. The state can follow the following steps in order to design a plan that can help it to meet the carbon emission limits for its power plants. The information can be presented in the table below;

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