Here is a very short, simple explanation of the "Cap and Trade" solution to carbon emissions. If you are taking Microeconomics this is something we will look at in detail. Cap and Trade seeks to put a numerical quantity of allowable carbon emissions by industry. It is different from the other solution to reducing carbon emmissions, which is a direct tax on the consumption of carbon based fuel (i.e. tax on gasoline). This type of tax is also called a "Pigovian Tax". BOTH solutions will raise the cost of fossil fuel based energy for people/businesses. One (Cap and Trade)is more subtle than the other (Pigovian Tax).
Bottom line: Cap and Trade identifies a QUANTITY of allowable carbon emissions and the Pigovian Tax puts a PRICE on carbon emissions...
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