Question

According to the EPA (link below), China is responsible for the most CO2 emissions, with more than double that of the US and triple that of the EU nations combined.

With this in mind, if the US were to levy a tax on carbon emissions, would this have long term detrimental effects on US businesses if other countries were not to follow suit? How can the US address a global emissions problem without handcuffing its own economy?

Answer 1

Approximately 40 nations and over 20 towns, states and provinces are already using or preparing to introduce carbon pricing systems. More than 22% of worldwide emissions are accounted for by these jurisdictions. Many more are creating carbon pricing schemes in the future. All in all, these activities will account for nearly half of worldwide CO2 emissions.

By identifying a tax on greenhouse gas emissions or–more frequently–on the carbon content of fossil fuels, a carbon tax directly establishes a price on coal. It is distinct from an ETS because the emission reduction result of a carbon tax is not pre-defined, but the carbon price is. Choosing the tool will rely on domestic and economic conditions.

Under a carbon tax, the government sets a price that emitters must pay for each ton of greenhouse gas emissions they emit. Businesses and consumers will take steps, such as switching fuels or adopting new technologies, to reduce their emissions to avoid paying the tax.

There are also more indirect ways of more accurately pricing carbon, such as through fuel taxes, the removal of fossil fuel subsidies, and regulations that may incorporate a “social cost of carbon.” Greenhouse gas emissions can also be priced through payments for emission reductions.

Carbon tax proposals have been implemented without achievement in Congress for several years, but proponents are hoping that the need for fresh revenue to pay for tax reform or infrastructure will make it more attractive politically. The financial consequences of taxing pollution are well recognized, but the main challenge is political viability.

Greenhouse gases such as carbon dioxide trap heat, helping warm the globe. The surge in carbon dioxide levels due to human activity since the Industrial Revolution is now causing an overall warming of the planet that is having impacts around the globe. And the burning of fuel generates not only carbon dioxide, but also air pollutants that are harmful to human health.

However, given future uncertainty, setting the accurate quantitative emission target now would generate major hazards with regard to the target's ultimate stringency. It would raise fears that a goal might turn out to be either unexpectedly stringent— unintentionally restricting financial development— or unexpectedly lax — resulting in higher emissions than without a deal. The impacts of uncertainty would be moderated by indexing emission objectives to the development of a country's gross national product (GDP).