Tax policy
A carbon tax is essential in ensuring a decrease in the amount of greenhouse gases that are emitted into the atmosphere. By charging an extra cost to top companies that engage in carbon emission into the environment, companies will be forced to use clean sources of energy in production. This makes the Formulation and implementation of the tax policy a necessity. However, the policy poses several challenges that make it difficult to attain success. For instance, implementing the tax rate, collecting the carbon, and ways to use the revenue received. The government and policymakers are tasked with the responsibility of policy formulation on the tax policy, taking into account the challenges involved.
Setting the appropriate tax rate to be charged on carbon dioxide emissions has been a challenge. Policymakers have different approaches to how the tax rate should be changed. Some policymakers agree that the cost of carbon emission should increase in real terms. This is because as the amount of carbon dioxide increases in the air, the social impact rises too. Another reason that makes it difficult to set the rate is estimating the amount of carbon dioxide effect in the air, which is impossible. Also, once emitted into the air, its effects are usually long term and could affect the atmosphere for a lifetime. Therefore no amount of tax can cover for the damage done once the carbon is already in the atmosphere. The government has to come up with a virtual rate that hope will at least discourage people from engaging in activities that will generate carbon.
Collecting revenues from carbon dioxide emitters is expensive. It is also difficult to monitor all sources that emit carbon dioxide into the atmosphere. The collection and monitoring are uneconomical and time-consuming. Many companies are involved in these activities some large emitters than others, making it difficult for the government to get to all of them. The government cuts down the costs involved by only focusing on significant sources that can easily be monitored. The government ends up overlooking many other small sources that cumulatively contribute to a substantial amount of carbon. The government should, therefore, find a more cost-effective way of charging all carbon emitters.
To conclude, formulating an appropriate tax policy is faced by several challenges that make it challenging to attain the goal of reducing carbon dioxide emissions into the air. Two central problems have raised the most concern among policymakers are difficulties in estimating the appropriate rate to be charged and collecting the taxes from sources of carbon emitters. The price is difficult to develop since the effects of carbon are long-term; hence the amount changed is usually not enough to cover the actual impact of the gases into the atmosphere. Collection and monitoring, on the other hand, is uneconomical. Inadequate policy formulation can significantly affect the goal of reducing carbon emission. Policymakers should devise ways that will help them deal with these challenges so that they can increase the efficiency of the carbon tax