Carbon pricing ethics

Abstract

The three main types of policies for addressing climate change are command and control regulation, carbon taxes (or price instruments), and cap and trade (or quantity instruments). The first question in the ethics of carbon pricing is whether the latter two (price and quantity instruments) are preferable to command and control regulation. The second question is, if so, how should we evaluate the relative merits of price and quantity instruments. I canvass relevant arguments to explain different ways of addressing these important policy questions, suggesting that carbon pricing is preferable to command and control regulation, and that price instruments have the theoretical edge over quantity instruments.

RETRACTED ARTICLE: Recent advances in green technology and Industrial Revolution 4.0 for a sustainable future

“…Carbon neutrality is another case where the externalities are internalized to create a carbon-double input level to innovate green technologies to produce low-carbon goods (Wang et al 2021a , b , c ). Generally, three policies would address climate change as an externality—command and control regulation, carbon taxes, and cap and trade (Mintz‐Woo 2022 ). Both carbon taxes and cap and trade are quantitative instruments for carbon pricing.…”

“…Both carbon taxes and cap and trade are quantitative instruments for carbon pricing. Suppose we increase the price of GHG emissions, in that case, the producers themselves will reduce their polluting activities and find alternate ways of disposal (Mintz‐Woo 2022 ). In the USA, most of the earlier policies dealt with the cap-and-trade policies and carbon taxes, which considered GHG emissions an externality leading to climate change.…”

“…However, it had been insufficient to significantly reduce the emission levels (Boyle et al 2021 ). As per Mintz‐Woo ( 2022 ), the USA prefers the command-and-control regulation since it either prohibits or sets specific limits regarding the emission levels. However, overall, carbon pricing is the most effective way to price the externalities.…”

“…This is because carbon pricing is flexible, highly efficient, and comprehensive. Here, it rewards the companies who reduce their emissions, which can recycle their revenues (Mintz‐Woo 2022 ). Carbon pricing can be done either through carbon taxes or cap and trade and could be a point of discussion.…”

Collective responsibility for climate change

“…After all, they are inexpensive in part because of subsidies, but also because the harm that they cause has not being factored into their overall cost. Not only do externalities produce misaligned incentives, but it is also arguably unfair to permit ostensibly costless pollution, particularly when the costs of emissions are experienced by third parties (Mintz‐Woo, 2022).…”