Cap and Trade v´s Carbon Taxes

Carbon emission regulations are here to stay. Companies that understand how the various disparate national systems work will be ahead of the game in terms of competition and management strategies.

Europe, Australia, NZ, Japan and many other countries already have some sort of emissions restriction system in place, we are all just waiting to see what the United States will do. Will it be a Cap and Trade system or a simpler tax on carbon emissions?  Looks like the cap and trade will win the day.

What is cap and trade ? Lets look at both terms

CAP = a limit placed on industry in terms of carbon emissions. e.g  a pulp mill is designated (normally by government) an emission limit of 100 tonnes of carbon dioxide per/year.

TRADE = If the above mentioned pulp mill only emits 80 tonnes during the year, that means it has 20 tonnes of CO2 left over to sell into the market, or trade. Of course the reverse would apply the pul mill emitted 130 tonnes of CO2, meaning it would need to buy back the excess 30 tonnes from the market, or trade them with another company that is under the cap.

Whereas a simple tax on carbon emissions means, all emitters of CO2 will pay a tax of some sort based on the amount of carbon emitted each year. I prefer this system as its far simpler and less open for, lets say coercion. However it appears the Obama government will continue with its plans for a Cap and Trade system after all.

In any case, be it Cap and Trade or a carbon tax, we are all about to come into a new era of environmental regulation and comliance.  It will begin by affecting the large polluters, but eventually will affect all of us.

Are you, your company, or your accountant ready for the new economy?

Green (not greed) is good!