Navigating Carbon Pricing Policies. Assessing the Efficacy and Practicality of Carbon Tax and Emission Trading Schemes for Climate Change Mitigation

Essay from the year 2022 in the subject Business economics - Accounting and Taxes, grade: 97, Free University of Berlin (Business Administration and Management), course: Business Management, Marketing, language: English, abstract: Carbon pricing, encompassing carbon tax (CAT) and emission trading schemes (ETS), stands at the forefront of climate change mitigation policies. This paper critically examines the effectiveness and practicality of these policies, particularly in reducing carbon emissions. Drawing from existing literature, it argues that carbon tax offers significant advantages over ETS in terms of practical implementation, environmental impact, and economic efficiency. However, it acknowledges the complexities and challenges associated with both approaches. One key aspect analyzed is the certainty regarding cost and benefits of abating carbon emissions. Carbon tax provides a relatively stable pricing mechanism, simplifying cost determination, while ETS offers more certainty about emission reductions and associated benefits. The paper discusses the trade-offs between these two approaches based on the shape of marginal cost and benefit functions, as proposed by Weitzman (1974). Revenue generation and utilization are also examined, revealing that carbon taxes tend to raise more revenue compared to ETS due to differences in pricing mechanisms. Effective utilization of these revenues is crucial for economic efficiency and addressing distributional concerns. Additionally, administrative requirements and political factors influencing policy adoption and design are discussed. The paper also evaluates China's carbon pricing landscape in China, highlighting the challenges faced by its ETS program and proposing a hybrid approach incorporating carbon taxes. Such a hybrid system aims to address administrative burdens while ensuring broader coverage of carbon pricing across sectors and industries. In conclusion, while both carbon tax and ETS have their merits, carbon tax emerges as a more practical and effective option. However, the paper suggests that a hybrid approach, tailored to specific contexts like China, could offer a viable solution to carbon emission reduction challenges. Overall, the paper contributes to the ongoing discourse on carbon pricing policies and their implications for climate change mitigation efforts.

Hello! I'm Armstrong Odiwuor, a versatile professional with over a decade of experience in various fields including teaching, customer service, and freelance writing. Graduating with a Bachelor of Business Management degree from Mt. Kenya University and I have demonstrated academic excellence throughout my education, earning Second Class, First Division Honors. With a passion for both education and business, I embarked on a career in teaching, serving as a High School Teacher. There, I taught Business and Management subjects, fostering a positive learning environment and achieving outstanding academic results. My dedication to student success was recognized when I was awarded the title of Business Teacher of the Year for the best-performing class. Transitioning into the corporate world, I gained valuable experience as a Customer Representative. In this role, I handled customer complaints, provided appropriate solutions, and maintained records of customer interactions, demonstrating strong communication and problem-solving skills. As a freelance writer, I expanded my skill set by contributing articles, research papers, and guides. My expertise in business, management, and finance allowed me to deliver high-quality content tailored to client specifications, while also assisting clients with resume writing and personal statements. In addition to my freelance work, I am an accomplished author and a dedicated blogger. I have published articles and books on various topics, showcasing my ability to engage and captivate audiences through the written word. With a strong foundation in education, a passion for customer service, and a talent for writing, I bring a unique blend of skills and experiences to every endeavor. I'm committed to making a positive impact in their professional endeavors and look forward to continuing to grow and contribute in my future endeavors.