Carbon Trading And Carbon Tax: Comparative Analysis Of Two Types Of Carbon Emission Reduction Measures

With people increasingly concerning about climate change, how to deal with global warming and reducing carbon emission has been made a vital subject under discussion in the international society. At present, there are two main measures adopted internationally: one is carbon exchange and the other is carbon taxation. This essay analyses and compares these two measures and recommends the more feasible one.To have a thorough understanding about carbon emission, this essay first analyses the cause of carbon emission and seeks some the theoretical options to solve the problem. Through analysis, this essay considers that the main cause of carbon emission is the negative externality of industry developing mode and carbon release. Thus the essential aim is to eliminate such externality. Considering the particularity of carbon emission, this essay concludes that the most feasible measures are the two which are now prevalent internationally, that is carbon exchange and carbon taxation. So this can logically explains why the two measures are most frequently adopted.This essay emphasizes on the detailed research on the implementation of carbon exchange and carbon taxation and further analyses and compares their reduced volume, pricing mode, stimulation mechanism, cost and adaptability in the future (6 aspects), which reflected comprehensively the features of carbon emission. By comparison, this essay finds these two measures differ greatly in the above aspects, especially in their functional mechanisms. To select the more feasible one, this essay takes into consideration that the basic demands of carbon emission reduction (effective, economical & stable), estimate the two measures in the 6 aspects and finally reach the conclusion that carbon taxation can meet the basic demands better than carbon exchange and thus is the better carbon emission measure. The fundamental disparity of the two is that carbon exchange controls the effects of future activities while carbon taxation controls the behaviours of future activities. In an economic society filled with changes and uncertainties, it is more difficult to control future effects than future behaviours, and thus is less feasible. This conclusion is entirely different from the prevalent view and out of the fashion of carbon exchange market. The reason for such a difference is that the greatest advantage of carbon exchange is its stimulation mechanism, which can greatly stimulate the enthusiasm of the enterprises and the public and forms a bubble. However, if viewed reasonably and considering the basic demands, one can find carbon taxation a better measure.Finally, based on the energy usage and carbon emission status of China and considering the participation status of the CDM, this essay gives some suggestion that is suitable to China's national condition. Since the resource energy structure of our nation mainly focus on coal and the carbon emissions are mainly released by industrial entities, the measure to be adopted shall focus on the adjustment of the energy structure and industrial structure of China. Carbon taxation, compared with carbon exchange can facilitate theses adjustment more directly and effectively. To conclude, carbon taxation, combined with other fiscal and industrial policies, can facilitate the restructuring of China's energy and industry, encourage the development and utilization of green energy, reduce the proportion of high energy-consuming and high carbon-emission industries and develop the low-carbon industry.