Carbon Tax – Should impose or not?
Carbon, everyone has heard about it. Carbon is an element which is represented by C in the periodic table. The carbon word has been derived from the Latin word ‘coal.’ This is because carbon is the constituent of coal. You might be aware of the carbon percentage in the earth’s atmosphere.
The amount of carbon present in the earth’s crust and the atmosphere is very small. The earth’s crust only contains 0.02% carbon in the form of minerals (like carbonates, minerals, petroleum and so on) and the atmosphere; it only covers 0.03% of the earth’s atmosphere in the form of carbon dioxide gas.
You might be thinking that though it is present in very less amount, still it has so much of immense importance. Why? We are ourselves made up of carbon compounds called organic compounds. You might have heard about the organic compounds. All the living things, plants, and animals are made up of carbon-based compounds called organic compounds. Therefore you can say that carbon is present in all the living things.
All the things around you are somewhere composed of carbon or contains some amount of carbon. The food materials like grains, pulses, sugar, tea, coffee, fruits, and vegetables, and so on are made up of carbon compounds. The fuels like wood, coal, kerosene, LPG, natural gas, CNG, petrol are too made up of carbon compounds. Carbon plays a very important role in life.
If you want to check the presence of carbon in the atmosphere or any other things, there is an identification test for it. Burn the carbon compound in the air; it will produce carbon dioxide gas. If the carbon dioxide gas turns lime water milky, it shows the presence of carbon in that compound.
Carbon occurs in Free State as well as in the combined state. In Free State, it exists in mainly two forms: 1. Diamond 2. Graphite 3. Buckminsterfullerene while talking about the combined state, carbon occurs in the form of carbon dioxide, fossil fuels, carbonates, and organic compounds.
Carbon has so much of immense importance just because it is versatile in nature. Carbon is tetravalent (having four valence electrons in its outermost shell) and self-linking ability (to form long chains of carbon atoms) which makes it versatile in nature.
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Carbon percentage in different sectors of the economy, such as:
- In Agriculture: 38% Carbon is used
- Energy industries, manufacturing industries, and fugitive emissions: 25%
- Land use and forestry: 14%
- Transport: 12%
- Waste: 6%
- Industrial processes and product use: 5%
These are the different sectors where carbon is used or generated.
It’s true when things are abundant; they might cause problems. Unlimited things aren’t than much beneficial. Carbon has so much importance, but it too has some cons that’s why here we are discussing why to impose a carbon tax. A Carbon tax is a tax levied on the carbon contents of fuels mainly transport and energy sector, carbon emissions trading, and so on.
Carbon, when produced in the form of carbon dioxide or other fuels, it harms the environment or causes a greenhouse effect which in turn causes global warming. When a hydrocarbon (a compound made up of hydrogen and carbon) such as coal, petroleum or natural gas is burnt in air, the carbon is converted into carbon dioxide and other compounds.
You might be aware that CO2 is a heat-trapping greenhouse gas. This causes the greenhouse effect; the greenhouse effect can somewhat be understood as the trapping of the sun’s harmful radiations. Greenhouse gases like Carbon dioxide, nitrous oxide, and methane trap this heat in the atmosphere.
The trapping of gases will gradually make an increase in temperature. This increment in temperature causes global warming. CO2 is one of the greenhouse gases. The combustion of fossil fuels causes a high amount of release in the content of carbon dioxide. This effect can be compensated for by taxing the carbon content of fossil fuels at any point in the product cycle of fuel.
The major purpose of imposing a carbon tax is to stop the carbon emission or reducing greenhouse gas emissions. People will make sure about this in order to not to pay the carbon tax. According to the recent researches, at least 27 countries and subnational units have implemented carbon taxes.
Yes, this has shown the best results. According to the results, the carbon taxes effectively reduce greenhouse gas emissions. Everyone thing has some pros and cons the same as with carbon.
A carbon tax is a type of Pigovian tax (the type of tax which is imposed on market activities that tend to impose some negative effect on the environment) and helps to address the problem of the greenhouse effect.
Are we losing the Greenery?
You would be shocked after knowing that India is now the third highest emitter of carbon dioxide. India has the world’s third largest endowment of coal, which could definitely help in doubling the amount of electricity production at relatively low cost.
There are many coal producing places, but India is one of the most expensive places to produce coal fired electricity. This happened after the coal scam.
The energy consumption is increasing day by day. This creates a lot of pollution. Local pollutants cause many health-related problems such as breathing, wheezing, asthma, and so on. It causes a lot of air pollution. This results in hypertension risk, life expectancy.
You might get shocked that life expectancy has been reduced by 2.6 years. The major cause of death is linked to this air pollution, i.e., air contamination, particularly from the industrial and transport sectors. Yes, the situation is getting worse day by day. You can take the example of NCR – Region. Gurugram is one of the highly polluted regions in India.
As per the statistics, India is the world’s fourth largest emitter of GHG. This is a serious threat and a topic to be concerned for. India’s total GHG emissions are more than 3200 million metric tonnes, which constitute around 7% of the world’s total GHG emissions, with an average growth of 6.3% in 2018.
The energy sector plays a very important role in this. It contributes mainly to 68.7% of total emissions. Over a span of 24 years from 1990, this emission has increased by 180%. Yes, this is really shocking.
Carbon tax over cap and trade system
I guess it’s better to put a tax to control its usage rather than finding out the way to limit its emissions through a cap and trade system. Cap and trade system is nothing but a process through which the limit of carbon emission is decided for the firms. Firms are required to buy permits if they pollute more than the prescribed limit.
It’s really obvious that carbon tax system is more affordable, reliable, and predictable. This tax has price certainty, transparency, and focuses on direct responses. You would now have understood the benefits of the carbon tax.
- Reduces emission of Greenhouse gases which is good for the environment. It will reduce the effect of global warming.
- Stimulates innovations. It leads to more innovations.
- Lastly, it helps to increase government revenue.
Yes, a carbon tax is the most basic economic instrument which can be used to price carbon and help to correct negative personalities. Understand like this, if polluter pollutes the environment, he has to pay for this. It can be a small amount or a huge amount.
This tax has been already implemented in various countries:
- British Columbia
These countries generate revenue up to $1.7 billion annually from the tax. In Finland, the carbon tax is based on the energy content of fuels and CO2 emissions. Great Britain introduced this tax in 2001. It has estimated that from 2007 to 2015, CO2 emissions reduced by 4.7% and real GDP grew more than 17%.
Carbon Tax in India?
On July 1, 2010, the Carbon tax was introduced in China that was of 50 Rs. Per tonne of coal both produced and imported into India. The finance minister further increased this price in 2014 by 100 Rs. Talking about India’s total coal production, it is estimated to reach 571.87 million tons in March 2010 and was expected to import around 100 million tons.
This carbon tax really helping to reduce the amount of carbon dioxide released per unit of gross domestic product by 25% to the year 2020. Due to this tax, it has promoted electric vehicles through subsidy, improved public transport as well as build infrastructure. It will encourage using green public transport.
The primary or we can say the major aim of promoting carbon tax is to discourage unfriendly environment production and consumer practices by just making the polluted sources much costlier. The revenue generated through this tax will also contribute to the dwindling tax revenue.
It’s high time to maintain GDP and India’s economy. So let just polluters pay instead of facing such problems. But talking about the cons of this carbon tax, yes it will affect the poor category. As when there will be a hike in the prices of fuel, it will definitely affect the poor people. A carbon tax is regressive in nature.
But it would generate more employment opportunities for people. Therefore, a carbon tax should be imposed in India.