Introduction
Climate change is an issue that has been the talk of people and specialists around the globe for many years now. Debates are being held so as to critic and know the real cause of it and ways on how to stop it if not totally eradicated in nature. Climate change us defined to be the rise of the Earth’s temperature. Researches have shown that there is a trend of the warming of the earth as time progresses; hence it is also known as global warming. The warming or the world is greatly associated with the human activities such as burning of fossil fuels and the excessive release of carbon dioxide in the atmosphere as a result of industrialization and continuous globalization of the world.It is also found out that the increasing trend that is happening with the world’s temperature is going on with the rate that is extraordinary in comparison to that of 1300 years ago. The advancements in technology have made it possible for scientists to the clearer picture and even enabled them to gather data so as to come up with resolutions to stop climate change.
Looking back in the middle of the 19th century, it was recorded that there were a volume of carbon dioxide up in the atmosphere which traps heat making it impossible to exit the earth. Hence, with this scenario, the volume of carbon dioxide molecules has the power to compromise the infrared energy being transferred in and out of the atmosphere. Evidences of global warming were also seen, observed and felt already around the globe and some of which are the temperature rise, shrinking of the ice sheets in Antarctica amounting to a loss of 152 cubic kilometers from 2002 to 2005, reduced snow cover that are present in Northern hemisphere which were reported to be melting as of today, the rise of water in the seas and oceans, the occurrence of extreme weather catastrophes and events and lastly, the acidification of the ocean caused by the continuous emission of carbon dioxide amounting to 2 billion tons every year in the atmosphere which are then being captivated by the oceans.1Many efforts have been made by countries, nations and organizations so as to minimize the effects of global warming and one of the most popular is the Kyoto Protocol which was signed by several nations and was made to control the carbon dioxide emissions of the countries and parties involved especially those which are considered as developing countries.
Moreover, for the case of Europe, their climate change policy is recently redesigned so as to be more specific when it comes to both the domestic and global context. Way back in 1990s, countries such as Sweden, Norway and Denmark had made initiatives in placing taxes in carbon emissions and later on, they have been involved primarily with Kyoto Protocol. Recently, there have been changes on the target of reductions on emissions and are now being broadcasted by European Commission; they have already released their proposals which focused on the need for new policies to be accepted globally as well as cooperation of the international community to effectively and efficiently reduce the emissions of greenhouse gasses. Moreover, the United Kingdom has taken initiatives with their Climate Change Program of 2006 or the CCP which includes updates of their adopted program way back in 2002.The CCP of 2006 contains the priorities and policies to be taken by the country for its own benefit and promoted all over the world. As of today, amendments and revisions are being made so that the policy will be as flawless as possible so as to be used for the long-term vision and mission of the CCP. Fortunately, there were already some of the policies which have been approved such that the Kyoto Protocol signatories would have their binding and utmost commitments in reducing their country’s emissions.
With the occurrence of such kind of framework, numerous companies, governments, groups and even stakeholders are looking after the result of these goals. Hence, the subdivision of instruments used are categorized under two classifications, one is the command-and-control while the other is the market-based policies3It is very essential that these two categories will be able to present every aspect of the enforcement requirements, the efficiency and effectiveness of the policy, the impact of the organizations and nations committed and the way and manner in which the allocation of commitments are set.
First, there are externalities of climate change that have negative image which should be approached in a good manner. The approach may come in different forms just like the following: a. the quantities of emissions may be minimized by the effective usage of the policies under command-and-control, b. any sole organization may opt to bring both the affected and cause of externalities, c. there can be introduction of tax to make the violators and emitters commit and respond to full cost of their emissions, and lastly d. the allocation of property rights may be distributed among those who are affected and cause of the externalities. With all these four policiesone is almost impossible to do and that is the second one since they would argue on their rights.
Market-based Instruments for Climate Change Policy
Market-based policy instruments are defined to be the regulations made to encourage the behavior with the use of market signals. These can come in the form of pollution charges or tradable permits which are mostly and commonly known to be market forces. These instruments when effectively implemented have the possibility and tendency of encouraging individuals, companies, nations and firms to finally take full control of regulating their emissions. In addition, those which are proposed with market-based policies are more likely to cooperate in achieving the policy goals.Implementing the market-based policy provides its users two advantages over the command-and-control policy. One is that it has a wide range of incentives for both the diffusion and innovation of technologies and is greatly cost-effective compared to the latter one. More importantly, based on researches and theories, when market-based policies are made to be effectively designed as well as implemented, it can enable the firm to achieve the anticipated level of cleaned-up pollution at the cheapest overall price and cost which will then eventually lead to another advantage of making it possible for incentives to be received through the reduction and almost total eradication of pollution.
With the presence of market-based policies, there is also the occurrence of a common goal of having an increased efficiency as well as effectiveness and economy. Based on the reports from Intergovernmental Panel on Climate Change or the IPCC, there has been a extensive assortment of the policies in existence that are presented by the government for the common goal of mitigating the greenhouse gases emissions3.Moreover, it has been also declared that the permits or tradable quota will be able to institute a common fee for carbon allowing having a certain amount of emission to be reduced though; there are still problems with the volatility of the price since it is very had to appraise the true cost. Also, the charges and taxes to be imposed are said to be efficiently reduce the emissions of greenhouse gases every country.
In recent times, the policy for global warming stated in the Kyoto Protocol was changed because of the reasons such as the existence of mechanisms deemed to be internationally innovative and that there were binding targets consensually approved by the signatories. For some data included in the Kyoto Protocol, there are parties such as the Annex I which have stated and committed to go through a targeted reduction of 5.2 percent as their minimum reduction from their level of emission during 1990s; furthermore, they should be able to comply with it from 2008 until 20123.There are different mechanisms injected in the Kyoto Protocol so as to achieve the stated goal. The most efficacious mechanism made within the Kyoto Protocol is called the Emission Trading which had the goal to promote the exchange of permits with regards to emission among a system of parties deemed as eligible; these parties are said to achieve a cost-effective national target. As for the case of Europe, they have their own Emission Trading Scheme which they follow in a “cap-trade” basis which entitles them to have an allowance for emission that is already pre-defined. By achieving this goal and maintaining their emissions below the ceiling, the difference that they were able to make can be sold to the market. However, if they failed to do so and unfortunately exceed the allowance stated, they have to buy another allowance from the other participating countries and their excess will be counterbalanced.
On the other hand, there are levies and taxes present which are mainly used as well in controlling the emissions but work in a different manner; this manner is through the inclusion of prices. There are these price instruments which are made to set the cost of a good or service and then let the market define the supply5.Whereas, a quota instrument works in an opposite manner such that it sets the amount of supple then sooner or later lets the market to define and give the price for the goods and services.
In another note, market-based instruments are usually governed by carbon taxes which aids the market-based to encourage people, firms, companies and organizations to invest on the process and technologies made out of low-carbon. Moreover, it can is under the market-based instruments in the sense that it has the market to define the goods that are emission-intensive which will therefore either cost more or can provide smaller profits. The effectiveness of giving carbon a tax is purely dependent on what is being taxed and the tax rate or how much it will cost.
As for an example, fossil fuels are beingtaxed which is greatly proportional to the emitted carbon once it is burnt. Another example would be the taxation of the volume of consumed energy such as both the renewable energy and the nuclear energy; the type of tax for this example is called eco-tax.
Usually, carbon taxes are made to be under the principle of the concept of sustainability, more importantly, the sustainability of development. One is because based on the principle of “polluter-pays”, a polluter should be responsible and accountable for the fees of mechanisms used to decrease the pollution that he or she has generated; this is in accordance to the extent of merely going beyond the allowable standards and levels of generated pollution and also the damage or devastation that it has incurred to the community. However, until today, it is still undetermined as to how much will the polluter be accountable for and when he or she should pay the amount. These problems then led to the conceptualization and planned implementation of the globally accepted principles of the environmental costs.
Today, there are uncountable researches and studies regarding the implementation of carbon taxes for the policies on climate change. And fortunately, it is now clear to the policymakersthe importance of every instruments used in supporting the details of the existing protocols that aimed to mitigate the extensive effects of global warming. The Kyoto Protocol is now heading to its expiration date and worry not for the world groups are ready to strengthen the existing protocol. There are numerous policies and efforts to still continue with their mission and vision to totally reduce the greenhouse gases emissions around the globe. Also, there are domestic and international groups which are more driven and motivated to provide other countries the policies that they are looking for so as not to be lost with the mission. More importantly, the market-based mechanisms and instruments are now deemed to be very essential in achieving the set goals. It is very important as well since it is denoted as a flexible tool and encompass a great amount of issues regarding as to when, how and where should the reductions of greenhouse gases should be made. It is also successful in giving out great incentives to those who are strictly following the policies and further encourages those to finally decrease the cost of the mitigation process.
References
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