The Kyoto Protocol is now largely regarded as a failure: even its modest goal of cutting CO2 emissions to pre-1990 levels hasn’t been met by most countries. One of the biggest problems, of course, is that the largest emitter of Carbon Dioxide – the United States – hasn’t been playing. But since Democrats regained control of Congress, there’s been an explosion of talk about (finally) implementing some kind of Federal restriction on carbon emissions. If any kind of carbon legislation is introduced, it’s likely to follow one of two schemes: a carbon market or a carbon tax.
A carbon market, also called “cap and trade,” utilizes the virtues of a market system to make it profitable to reduce emissions. Under a cap and trade system, institutions are given limits to the amount of carbon they can emit. Companies with poor emissions records can buy “credits” from companies with good environmental performance. The fewer the credits available, the more expensive they become, and the more it makes sense to reduce emissions instead of buying credits. If a federal carbon trading system were to be instituted, it would hardly be without precedent: the Chicago Climate Exchange is a voluntary (read: small) US-based carbon market, while the EU’s principal mechanism for adhering to the Kyoto Protocol is a market called the EU Emissions Trading Scheme.
Carbon Taxes, meanwhile, are somewhat more straightforward: like the name suggests, they would tax institutions (or even individuals) for the amount of carbon they emit through their activities. Again, carbon taxes are nothing new: many Northern European counties now have one, and Boulder, Colorado recently became the first US city to introduce a carbon tax for its citizens, though the amount each person pays per year – around 14 dollars – makes the measure is largely symbolic as a means of encouraging a more sustainable lifestyle.
The Carbon Tax Center is a new NYC-based non-profit dedicated to – you guessed it – advocating for a federal tax on carbon emissions. So far, they haven’t given too many specifics on how the tax would play out, so it’s too early to tell if they’re for real. However, the site does include a great article explaining the advantages of a tax over a carbon market: simplicity, transparency, and expediency are some of the big ones.
Though it might be a better means of reducing our CO2, a carbon tax would probably be all but impossible to sell politically at the moment. Still, even if we had to wait a couple years for a more receptive administration and general public, the mid- to long-term effects of a carbon tax on our emissions would be far better.