In 2009, Representatives Waxman and Markey inspired the American Clean Energy and Security Act in the House of Representatives. Within this legislation a cap and trade program was a pivotal component, but it is now possible that this will be replaced with a straightforward carbon tax. The American taxpayers appear to be leaning in this direction if we are to believe the results of research conducted by Hart Research. The US Climate Task Force commissioned a poll among 1000 registered voters, who indicated clearly that a straightforward carbon tax was preferable when dealing with climate change.
Cap and trade programs work when the central government puts limits on the total volume of carbon dioxide emissions that are permissible within any one year. Those companies that contribute are then identified and are forced to enter into an auction-based program, where they buy permission to emit carbon. It is said that this trading environment will help to drive the price of carbon and will effectively limit greenhouse gas and its consequent damage.
The EU Emissions Trading scheme came into being in 2005 among the 27 nation European Union, at the behest of environmentalists to make strides forward. This scheme was basically the first time that the cap and trade program had been tested within a major climate protection initiative. Opinions vary as to whether it is a success, with some declaring so, but others pointing to problems associated with insecurity, oversupply and volatility.
The United States’ political landscape has certainly changed in the past year. It’s very difficult to know how the scene will change in politics in a week, let alone in a long period of time and it seems that climate issues will end up being restructured. It’s far from certain that the cap and trade program outlined in the House of Representatives will gain traction and it may well be that a carbon tax will be directly attached to the most polluting forms of energy.
The healthcare debate took a lot of steam out of Congress and it is highly unlikely that a similarly contentious and very divisive issue will be tolerated again. As such, cross party support will be required and the Republican Party is definitely against cap and trade, so direct carbon tax could be the answer.
Advocates tell us that the idea behind a carbon-based direct tax is that not only will it reduce emissions, but the taxes generated should be passed back to ordinary citizens. Carbon tax would undoubtedly push up the cost of energy, so relief should be seen in other areas.
American businesses should expect to be affected by a carbon tax in the future and should realize that it is in their best interests to cut back on the amount of carbon emissions that they are responsible for. By being proactive in this fashion they could even carve out an advantage over their competitors, who may not be aware of the looming issues, or may be slow to act.
Companies should note that every asset that they are responsible for is in turn responsible for emitting carbon as it uses energy to function. As such, the performance characteristics of each asset must be fully understood and business owners must be sure that their operation is totally efficient, especially if they are not only to meet the demands of legislation, but an increasingly critical public as well.
Daniel Stouffer has a lot of information about the carbon tax and how a visit to www.verisae.com can aid you.
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