MASTER TOPIC: Environmental Economics: Pricing Carbon Read the instructions below and create your 10 minute video presentation on your chosen topic. See rubric below for additional guidance on grading. There are many ways to create your presentation vi

Environmental Economics: Pricing Carbon

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Pricing Carbon

Pricing of carbon entails fixing specific on the carbon emission with the focus of reducing the carbon emission and make the investors invest in options that are cleaner. The governments of most of the developed countries as well as some of the developing countries have taken various paths towards pricing of the carbon emission (World Bank, 2017). These commence by capturing the external costs of the emissions of carbon. These are costs that are paid by the public by other means such as via health costs as well as crop damage costs which occur as a result of the effect of the carbon emission.

According to World Bank (2017), the carbon pricing assist is shifting of the damage burden back to the companies or individuals who are responsible for producing it as they who are in a capacity of imposing measures to reduce the burden. Rather than depicting who ought to reduce the emissions, how and where, the aspect of carbon pricing offered an economic signal, and this makes the polluters make decisions on whether they will proceed emitting carbon, reduce their emission, stop the polluting activity or pay the imposed price. In this regard, the environmental objective is attained in a way that s flexible as well as less costly to the society. The use of the carbon price is also efficient in that it stimulates the market and clean technology innovation, as well as drivers of low carbon and this participate words the economic growth (Greene & Plotkin, 2011).

The carbon pricing is of two basic types. First is the carbon taxes and the emissions trading systems. The Emission trading systems in other nations are referred to as a Cap-and-trade system. It permits the industries that have low carbon emission to sell the allowances that they have which are extra to those companies that are larger emitters. Through the creation of the demand and supply of the emission allowances, the systems create a market price for the emission of the greenhouse gases where carbon is one them. Also, it ensures that the emission reductions that are needed will take place to ensure the emitters are within the ranges of the carbon budget that have been pre-allocated.

According to Ellerman et al. (2010), the carbon tax entails directly setting a price on carbon through the definition of the tax rate on the emission of the gas of the greenhouses or the most common carbon content that is found in the fossil fuels. Carbon tax differs from the emission trading system in the aspect that the outcome of reduction of the emission of the carbon tax is never predefined while that of the price there is predefining.

With the two types of carbon pricing, the one to be used is determined by the economic or national circumstances of a given nation. However, more ways are indirect and accurate for pricing carbon for example via increasing the taxes on fuels, withdrawal of the subsidies of the fuels as well as some incorporation that have the capacity of introducing some social cost on carbon emission (Rivers & Sawyer, 2008). It is also another indirect way to price the carbon emissions via the payments for the reductions of the emissions. With this, the private companies have the highest capability or buying the emissions deductions so that they can compensate their deductions and this is what is termed as offsets (Center, 2008).

Carbon Pricing is an essential part of an enormous package of policies that reduces the emissions of carbon as well the emissions of the greenhouse gases. Some of the complementary policies examples entail the performance standards. Most of the nations set efficiency standards of fuel for the motor vehicles as well as efficiency standards that are linked with building involving the windows, lighting, heating, ventilation as well as the cooling systems. The other complementary policy is of the financial instruments where some nations provide exemptions of taxes for the energy and appliances efficiency improvement. In the European countries, there are the Auto feebates, which is a combination of surcharge on energy on cars that are inefficient and have a rebate on the energy of vehicles that are more efficient. Another policy is on law enforcement where in Brazil clarifying as well as classifying the laws that are already existing has been proven to a strategy that is of low cost as well as effective in the reduction of deforestation (Aldy & Stavins, 2012).

However, according to Pindyck (2013), pricing the carbon emission addresses an externality, which is the market failure but is not sufficient in addressing other shortcomings of the market. The thus stipulates that adding a price on the carbon emissions does not adequately address all the relevant market failures that are contributed by the human activities. Also, an amount that has been fixed to be too high tend sacrificing the economic well being of the society concerning prices that are low since the prices of energy would also be too high. However, a lower price is not even essential, as it would entice the continuous release of the carbon emissions into the atmosphere.

In conclusion is that depending on the instrument that is used by a given nation, carbon pricing has a high potential for minimizing the emissions of carbon to the atmospheres as well as other greenhouse gases. However, the prices should be efficient in that they are not set to high or too low for efficiency.

References

Aldy, J. E., & Stavins, R. N. (2012). The promise and problems of pricing carbon: Theory and experience. The Journal of Environment & Development, 21(2), 152-180.

Center, C. T. (2008). Pricing carbon efficiently and equitably. Carbon Tax Center, May, 23.

Ellerman, A. D., Convery, F. J., & De Perthuis, C. (2010). Pricing carbon. The European Union Emissions Trading Scheme. Cambridge.

Greene, D. L., & Plotkin, S. E. (2011). Reducing greenhouse gas emission from US transportation. Arlington: Pew Center on Global Climate Change.

Pindyck, R. S. (2013). Pricing carbon when we don't know the right price. Regulation, 36(2), 43.

Rivers, N., & Sawyer, D. (2008). Pricing Carbon, Saving Green: A Carbon Price to Lower Emissions, Taxes, and Barriers to Green Technology. David Suzuki Foundation.

The World Bank (2017). Pricing Carbon. Retrieved from http://www.worldbank.org/en/programs/pricing-carbon#CarbonPricing