Climate change has increasingly pervaded policy decisions on tax. Using tax policy has helped to drive green behavior all through the world. These taxes apply to Energy Efficiency Standards in homes. The Emission Reduction Fund (ERF) calls for the need to use renewable energy and energy and fuel efficiency. Some incentive-based policies such as Cap- and – Trade and tax penalties/ credits have had economic effects and positively impact the environment. Cap-and-trade is a policy from government regulatory programs that limit or cap the overall chemical emissions level like carbon dioxide. The approach works where the government has given a limited number of limits every year that permits companies to emit several pre-determined emissions. This level becomes the emissions cap of that company. If the company produces above the Cap in the emissions level, the company will have to pay heavy taxes. Metcalf (2019) points out that if the company lowers its emissions level, it can sell or trade unused permits to other companies. On the other hand, tax credits and penalties mean the prices placed on greenhouse gas pollution from fossil fuel burning. These taxes place a monetary value on the amount of carbon produced, which impacts greenhouses as emissions. Through this system, increasing emission costs will, in turn, create the need to invest and adopt cleaner energy strategies. Also, tax penalties make greener technologies more cost-effective for businesses, households, and the industry through rising pollution activities costs. These Incentive-based policies have had positive economic effects by successfully reducing carbon dioxide, nitrous oxide, and Sulphur dioxide emissions. The cap-and-trade approach has been successful in the United States in reducing these harmful toxins that are responsible for acid rain. According to Purdon (2017), the cap-and-trade system has reduced acid rain from toxic emissions since the early 1980s. The reduction is by almost half, which has contributed to a healthier environment. The CAFÉ standards by the National Highway Traffic and Safety Administration (NHTSA) provide a set of regulations for light trucks and passenger car model year 2017 and ahead. The policies of CAFÉ have not just helped improve the efficiency of energy in the Nation’s fleet. Still, they have also helped to increase the accessibility and availability of vehicles that use alternative fuel. The policies have also helped to reduce the consumption of petroleum. CAFÉ standards have also contributed to the promotion of innovative technologies as well as their advancements. Finally, CAFÉ standards have lowered greenhouse gas emissions and have helped improve air quality and mitigate climate change. SO2 regulations play a vital role in the reduction of industrial sulfur dioxide. Through a regression analysis in exploring regional heterogeneity, Wu et al. (2019) found that the SO2 policies substantially impact the removal of sulfur dioxide in most parts of Central China. Also, the study shows that the same policies exert a positive impact on economic growth in most parts of this country. The Green Deal is a policy framework that aims to mitigate the negative impact of climate change. It will affect every aspect of the economy, including construction, transportation, energy, agriculture, and food production. The Green Deal is an action plan that calls for the restoration of biodiversity and cutting down on pollution. The plan outlines the investments required such ad financing tools and assets needed in making the climate neutral by 2050. To reach these goals of the green deal, all sectors of the economy have to take action through decarbonizing the energy sector and rolling out cheaper, healthier, and cleaners forms of energy. It can a loss be through supporting innovations in the industry and finally through investing in environmentally friendly technologies. These major strategies will bring about significant environmental change to all aspects of the economy. For example, the will be doubled economic growth from the use of resources, and there will also be no greenhouse gas emissions by 2050.
References
Metcalf, G. E. (2019). On the economics of a carbon tax for the United States. Brookings Papers on Economic Activity , 9 (1), 405-484.
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Purdon, M., Hole, D., & Lachapelle, E. (2017). The political economy of California and Quebec's cap-and-trade systems . Sustainable Prosperity (University of Ottawa).
Wu, X., Gao, M., Guo, S., & Maqbool, R. (2019). Environmental and economic effects of sulfur dioxide emissions trading pilot scheme in China: A quasi-experiment. Energy & Environment , 30 (7), 1255-1274.
