Page 14 - Environmental_Green Technologies

14

The Cap and Trade, being a type of policy, can be found implemented in different ountries and at different
levels. For example, it was introduced in the European Union in 2005 with the EU emissions trading system
(EU ETS), which also operates in Iceland, Liechtenstein and Norway. The most relevant information
regarding EU ETS is:

- It limits emissions from more than 11,000 heavy energy-using installations (power stations & industrial
plants) and airlines operating between these countries.

- It covers around 45% of the EU’s greenhouse gas emissions.

More information about the way Cap and Trade policies are held in the EU can be found in this link. (
European Commission)

Carbon Tax

Carbon tax is a policy that establish a tax/fee on the carbon emissions of fossil fuels for decarbonize,
eliminate the use of fossil fuels and protect the environment. Users of carbon fuel must pay a fee because
it release carbon dioxide. It is an incentive, a monetary approach, to switch to clean energy by making it
more rewarding (C2ES, 2019).

Source: (EcoInventos, 2019)

The Carbon Tax is applied on the fuel’s carbon content, because the amount of CO2 release is proportional
to the carbon present in the fuel. It is possible to establish the Carbon Tax directly to the fuel when it is
being extracted or imported/exported. The Carbon Tax is payed using the existing tax collection
mechanisms: ‘’upstream’’ and fuel suppliers and processors can pass on the cost of the tax to the extent
that market conditions allows, and in this way it motivates consumers and producers to reduce their
carbon dioxide emissions, by being a monetary incentive. However, the carbon present on manufacturing
products, such as the plastics, if it is not burned, will not be charged with a fee or any tax. In the same way,
the CO2 released during production but sequestered and not released, will not be taxed.