Reducing the Carbon Footprint by Imposing a Carbon Tax

Exclusively available on PapersOwl
Updated: Mar 31, 2023
Cite this
Date added
Pages:  2
Words:  482
Order Original Essay

How it works

A new study by the Global Commission on the Economy and Climate suggests that curbing carbon emissions by the imposition of a tax on carbon could generate a revenue of $26 trillion. Fossil fuels are a primary commodity widely used in everyday life. By burning fossil fuels, a carbon footprint is made on the environment. Carbon dioxide is released into the atmosphere, contributing to air pollution and climate change. These two outcomes pose external costs to society caused by the effects of a worsening environment.

Need a custom essay on the same topic?
Give us your paper requirements, choose a writer and we’ll deliver the highest-quality essay!
Order now

It is considered to be a market failure. Market failure occurs when a free market fails to allocate scarce resources at the socially optimal level of output. In this case, market failure can be described as a negative externality of production. The negative externality of production is when the third party suffers a cost as a result of actions from a separate agent.

The negative externality of production can be fixed by imposing an indirect tax. Indirect taxes increase the costs of overall production. To internalize the negative externality, the most efficient is, in this case, a carbon tax. A carbon tax is an incentive tax for producers to reduce pollution. In other words, the polluter pays. It is the most widely used measure to fix such a situation, determined by the cost for each unit of emitted emission.

The carbon tax is one of the most comeconomicmics solutions. However, the disadvantages of imposing a carbon tax might outweigh the benefits. It is not usually set at the right level and tends to be regressive, meaning that for some producers, the cost of the tax might have destructive effects. Moreover, a carbon tax does not fix emission levels. An alternative solution might be the cap and trade system based on tradeable emission permits. It adds the motive of profit, which can be a crucial factor for firms failing to satiate their appetite for economic benefits. The principle lies in the government setting a cap or the maximum number of emissions an economy can emit.

Each firm then receives an allowance with its own restrictions. By this, the quantity is directly lowered. Some firms give away more money to research and are quicker to replace fossil fuels. They can sell their allowances to firms that pollute more and make a profit out of it. Hence firms are motivated to fund sustainable technology development and, by that, become eco-friendlier and minimize the externality. There are more ways of cutting down on carbon, including restrictions on development in wetlands, improving agricultural productivity, and cutting back on plaspackagingages, as mentioned in the article.

On the whole, the carbon tax seems to be the most widespread and straightforward resolution to the externality. Nonetheless, it is sufficient only in the short term due to the urgent obligation to protect nature. What the world really needs is long-term sustainable development reached by using sustainable technology.

The deadline is too short to read someone else's essay
Hire a verified expert to write you a 100% Plagiarism-Free paper

Cite this page

Reducing the Carbon Footprint by Imposing a Carbon Tax. (2023, Mar 28). Retrieved from