Carbon tax: a price control mechanism

There is another alternative way to lower the speed of global warming process is a price-type control mechanism. To be more specific, it is internationally harmonized carbon tax. William D. Nordhaus’ study is on analyzing about “the relationship to ultimate targets, performance under conditions of uncertainty, volatility of induced carbon prices, the inefficiencies of taxation and regulation, potential for corruption and accounting finagling, and ease of implementation.”(26) His conclusion is that the price-type approaches work far more effective comparing with quantity-oriented mechanisms such as the Kyoto Protocol. 

         About the price approaches to climate change, the principle subject been discussed in the paper is called harmonized carbon taxes. It is “a dynamically efficient Pigovian tax that balances the discounted social marginal costs and marginal benefits of additional emissions.” (35) From the context of his research, under the price control approaches, there are no binding limits of the emission, which is different with the Kyoto Protocol. The Kyoto Protocol sets a limit level of carbon emission for all members. On the contrary, the price approaches is a widely agreement of countries that they have a carbon price or carbon tax as an internationally used penalty for carbon emissions. Under this approaches, there is no allowed emission quota, no trading between members of the emission; this represents that countries have to pay for every single ton of carbon dioxide that they produced. This is a powerful constraint for both developing countries and also developed countries. Under the price-type method, all countries now have to pay for what they have done to the environment by dumping extra carbon dioxide.

Nordhaus, William D. "To Tax or Not to Tax: Alternative Approaches to Slowing Global WarmingTo Tax or Not to Tax: Alternative Approaches to Slowing Global Warming." Review of Environmental Economics and Policy 1.1 (2007): 26-44. Print.