Carbon pricing

Kanisa George

A significant contributor to the global warming dilemma is the process of carbon emissions. Carbon emission refers to releasing greenhouse gases and/or their precursors into the atmosphere over a specified area and period. The presence of carbon dioxide is mainly due to human activities and stems from the burning of fossil fuels and the manufacturing industry.

According to observations by the NOAA Global Monitoring Lab, in 2021, carbon dioxide alone was responsible for about two-thirds of the total heating influence of all human-produced greenhouse gases. Science has proven that the only way to save our environment and stop the cooling effect would be to reduce the emission of greenhouse gases significantly. Yet even if this is done, scientists estimate that if global emissions suddenly stopped, it would take a long time for surface air temperatures and the ocean to begin to cool.

This is due to the excess CO2 in the atmosphere, which according to research, would remain in the atmosphere for a long time and continue to exert a warming effect.

Scientists predict that future technological advancements might be able to remove greenhouse gases from the atmosphere. In such “negative emissions” scenarios, we might be able to reverse CO2-driven warming and reduce the time scale of excessive warming.

Until then, specific carbon emission policies have been developed in many countries to combat the cooling effect.

A 1991 research paper by Parry and Williams strongly recommended broad-based emissions taxes and tradable emissions permits over other policy instruments to protect the environment.

Other policy instruments, such as command and control policies and indirect environmental taxes (such as taxes on energy use rather than on emissions), do not cover all sources of emissions in the economy.

Usually, carbon policies focus on carbon taxes and other pricing mechanisms, improvements in fuel efficiency, alternative fuel, and congestion mitigation. However, of all the recommended carbon policies, implementing a carbon tax is by far the most popular.

Carbon taxation, also known as carbon pricing or price of carbon, refers to a fee imposed on the burning of carbon-based fuels (coal, oil, gas). This policy is inherently aimed at reducing and eventually eliminating the use of fossil fuels. Supporters of carbon tax believe that forcing users of carbon fuels to pay for the climate damage caused by releasing carbon dioxide into the atmosphere is the only way to effect change to the system. It is hoped that if these taxes are set high, it becomes a powerful monetary disincentive that motivates companies to switch clean energy across the economy, simply by making it more economically rewarding to move to non-carbon fuels and energy efficiency.

Countries worldwide are implementing carbon taxes to compensate for the pollution being spread by large corporations and industries. According to the World Bank, 68 direct carbon pricing instruments are operating as of June 2022 in 46 national jurisdictions. These comprise 36 carbon tax regimes and 32 emissions trading systems.

In an effort to curb climate change, Canada implemented the Greenhouse Gas Pollution Pricing Act to help the country reach its sustainable development goals. This act implements a carbon tax that puts a price on carbon facilities that emit 50,000 tonnes of carbon or more per year to pay for their emissions.

European countries have taken significant steps to address their carbon footprint by implementing a carbon tax and other mechanisms. For example, the Danish parliament recently approved a new corporate carbon tax, which is reportedly the highest in Europe. Reports suggest Denmark has set a target of cutting greenhouse gas emissions by 70 per cent from 1990 levels by 2030. The total CO2 levy will be 1,125 Danish crowns ($159) per tonne by 2030 for companies subject to the EU Emissions Trading System and will consist of a 375 crowns fee on top of the projected 2030 price of EU carbon permits of 750 crowns.

This move would seek to capture companies both in and outside the EU’s carbon quota system. Interestingly, although responsible for 0.1 per cent of the world’s CO2 emissions, the Caribbean region is falling behind when it comes to strategic methods to aid in reduction.

Though mention has been made about carbon pricing right here at home and in neighbouring Caribbean countries, efforts are in the infancy stages, and full implementation might be a long way ahead.

Though carbon pricing has many cons, like the trickle-down effect on low-income households, this mechanism proves to be a sure-fire way to ensure accountability. Hopefully, it would be enough to help combat the greenhouse gas effect.