Sociopolitical Solutions: Using Economics to Solve Global Warming

   
     In terms of international, practical, solutions to climate change, two main options have been most considered by the Conference of Parties in past UNFCCCs. These solutions are based on fundamental economic principles that influence our sociopolitical structure of daily life. The two options are cap-and-trade and a carbon tax. Both treat carbon as a commodity that can be bought and sold in order to lower the rate of pollution into the atmosphere.


     A carbon tax imposes a tax on each unit of greenhouse gas emissions (mainly CO2) on businesses, firms and individual citizens an incentive to reduce pollution in order to save money. Obviously, the level of pollution reduced heavily depends on the price of the tax.  The tax is created by assessing the cost of the damage associated with each unit of pollution and the costs involved with dealing with the effects of the pollution.


     On the other hand, cap-and-trade puts up a maximum level of pollution (a cap) and distributes emission permits among business and firms that produce greenhouse gas emissions. Companies that then invest in technologies that lower their overall carbon and other greenhouse gas emissions and fall below their permit can then sell what's left to another company that pollutes above their permit. The idea of cap-and-trade is to create an economic incentive, similar to the carbon tax that will ideally decrease overall pollution in a respectively rapid rate over the coming decades.


     Both of these plans essentially set a price on pollution, but which is more feasible?


Carbon Taxes vs. Cap and Trade: A Critical Review


Combating Global Climate Change: Why a Carbon Tax is a Better Response to Global Warming than Cap and Trade


Cap-and-Trade or Carbon Taxes? The Feasibility of Enforcement and the Effects of Non-Compliance


Addressing Climate Change with a Comprehensive US cap-and-trade System


Exxon is right: Let us re-examine our choice for a cap-and-trade system over a carbon tax