The pros and cons of carbon tax
1) What is carbon footprint? how is it calculated?
2) Explain the pros and cons of carbon tax, and carbon
cap-and-trade? and how they work?
Solution
What is carbon footprint? How is it calculated?
Over the years, there has been an ongoing debate regarding the detrimental impact of
human activities on the environment. The wide usage of fossil fuels coupled with the continuous
exploitation of natural resources has in turn led to an environmental disaster. A research
conducted by Wiedmann and Minx (2008) revealed that greenhouse gasses which are as a result
of the extensive usage of fossil fuels forms the basis of climate change. In essence the
quantification of the emissions caused by green house gases can be termed as Carbon Footprint.
Therefore, Carbon footprint can be regarded as the amount of greenhouses gases or carbon
dioxide that is directly or indirectly released into the environment owing to specific human
activities. Carbon footprint is therefore as a result of the broad human and organizations
activities which releases tones of methane, which have adverse climatic conditions. Generally,
Carbon footprint is expressed in terms of tons of carbon dioxide calculated within a given period
of time, mostly one year.
An organization carbon footprint comprises of all the direct and indirect greenhouse
gases emissions which are as a result of the activities of an organization. The direct
organizational emissions are normally as a result of the assets and the production processes of an
organization. For instance, gases emitted during the production process, usage of vehicles for
transportation of products from one place to the other, leakages of oil, and improper disposals of
the organizations waste among others. The indirect emissions occur as a result of usage of
electricity and heat as well as high voltage appliances. On the other hand, Product carbon
footprint comprises of all the emissions that occurs during the life cycle of a product. Such
emissions include; emissions that occurs during raw materials processing, the manufacturing
Assignment 2: Questions 3
process of a product, use as well as disposal of product waste. The adverse effect of green house
gases that leads to global warming explains why there is a dire need of curbing the release of
carbon emissions into the environment.
Carbon footprint is measured based on the amount of carbon dioxide that a specific
activity emits, any other greenhouse gas emissions of the said activity, as well as the
environmental impact of the activity. In essence, it is calculated by weighing the impact of the
carbon dioxide equivalents (CO 2 e) over a period of time (Pandey, Agrawal and Pandey, 2011).
There are various online calculators which an individual or a business can use to calculate carbon
footprint based on the size of the company, efficiency of the machines used, and amount of
products recycled. Though the methods used to calculate carbon footprint are not entirely 100%
correct, they can be used to gauge the amount of CO 2 that an activity generates so as to take
measures of reducing carbon footprint.
Explain the pros and cons of carbon tax, and carbon cap-and-trade? And how they work?
Carbon Tax refers to a fee set by the government on any company found producing green
house gases as a result of burning fossil fuels. The fees are set to discouraged companies against
burning of fossil fuels. The tax is therefore set to reduce emissions in mainly two ways. Firstly,
the tax seeks to increase the cost of carbon based fuels so as to encourage individuals and firms
to adopt other sources of clean energy such as wind and solar energy. Also, the tax aims at
increasing the cost of electricity and petrol to enable the consumers adopt more efficient energy
sources so as to reduce the emission of greenhouse gases. The tax collected acts as an added
revenue which can be spent on developing mitigating factors aimed at eliminating pollution. The
main cons of Carbon tax is that it is regressive owing to the fact that the additional cost imposed
Assignment 2: Questions 4
on fossil fuels eventually imposes a great burden to companies, a cost that directly trickles down
to the consumers (Wood, 2018). In addition, firms may choose to shift production to other
countries in an effort to evade from carbon tax. The tax may also encourage tax evasion from
firms who choose to pollute the environment secretly so as to avoid the tax.
Carbon cap and trade occurs when a government puts limit on the amount of carbon
pollution an industry can produce, the limit is reduced to a certain amount yearly so as to achieve
the recommended pollution target. By setting an emission limit that reduces over time cap and
trade policy ensures that emissions fall below the targets over time. This thus indicates that the
cap provides certainty regarding the total amount of emissions that will be reduced. However the
main disadvantage of this policy is that it may lead to unfair allocations for specific firms, the
cap is thus susceptible to loopholes.
Generally, carbon tax indicates the degree to which usage of green sources of energy are
encouraged. In carbon tax, a specific price is set, such that companies are charged an amount of
money for every tonne of emission produced. A high amount of tax on emissions automatically
leads to firms adopting other forms of energy sources. On the other hand, Carbon cap and trade
works in a way that a cap is issued on the acceptable amount of carbon emissions where the cap
is reduced yearly so as to arrive at a specific predetermined pollution target (Wood, 2018).
Through the yearly reduction, the cap is set to force polluters who exceed their predetermined
allowances to buy other companies unused allowances. This creates a motivation for companies
to drastically reduce their emissions so that they may sell their allowances rather than buying the
pollution allowances from other companies.
Assignment 2: Questions 5
References
Pandey, D., Agrawal, M., & Pandey, J. S. (2011). Carbon footprint: current methods of
estimation. Environmental monitoring and assessment, 178(1-4), 135-160.
https://www.researchgate.net/profile/Divya_Pandey4/publication/46289480_Carbon_Foo
tprint_Current_Methods_of_Estimation/links/00b7d51690ad7bbcb5000000/Carbon-
Footprint-Current-Methods-of-Estimation.pdf
Wiedmann, T., & Minx, J. (2008). A definition of ‘carbon footprint’. Ecological economics
research trends, 1, 1-11.
http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.467.6821&rep=rep1&type=pdf
Wood, J. (2018). The pros and cons of carbon taxes and cap-and-trade systems. The School of
Public Policy Publications, 11.
https://jmss.org/index.php/sppp/article/download/52974/43930
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