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Before going into a detailed discussion of what is carbon tax, we should first understand why this specific pricing scheme was implemented and what its purpose would be to everyone involved. You may have heard of the Kyoto Protocol, a global agreement ratified by many first-world countries and several developing nations in the 1990s as part of a global initiative to reduce the quantity of greenhouse gases in the atmosphere also to gradually lessen the world's carbon emissions. Australia's current carbon pricing scheme is another attempt at reducing the country's carbon level index (CLI), which leads us to the analysis of the trading mechanisms for the buying and selling of carbon credits. According to carbon tax , director of climate change policy at the Institute of Public Affairs in Australia, PM Gillard's government has implemented, by far, the "largest & most broadly applied carbon tax" on earth.

The Carbon Trading Schemes: Deeply Flawed and Heavily Exploited

Carbon became such a hot commodity in Europe because the Union implemented its trading system for carbon credits among its developing and non-developing member nations. After a lot more than four years, economists, legislators, and hard-line critics of the carbon trade discovered it is a deeply flawed system. Unscrupulous firms took benefit of the trading scheme's weaknesses to generate a killing available in the market while they continued to charge their consumers expensive charges for the products and services they delivered. Sadly, profits made from trading carbon credits were often overlooked in the books.

The original motivations for awarding carbon credits to businesses with lower CLI included na�ve assumptions about the goodness inherent in all humans and how strongly this factor influences a person or an organization to walk down the path of greed and selfishness. For example, power firms who truly appreciated the chance to recuperate whatever investments they've poured into clean energy ventures would've also made efforts to pass on the torch of goodwill to end-users and business associates through discounted rates and will be offering of financial incentives to those who've also reduced their energy consumption (and their personal carbon footprint, too). Contrary to expectations, the reward system for companies with reduced emissions backfired because heavy emitters always had the choice to buy more credits that would allow them to release more noxious fumes and pollutants into the air.

Is the Carbon Tax Similar to an Emissions Trading Scheme or ETS?

In accordance with an SBS Australia article by Chiara Pazzano, imposing a $23 tax per megatonne of emissions isn't much like capping the carbon levels for every firm. In a ETS framework, the government issues an exact number of permits, which should be distributed equally to heavy emitters. Companies with low indices won't need to pay for these permits, but rather receive credits, that they can sell to firms who've reviewed their carbon limits.

In contrast, the carbon-based levy puts a heavy financial load on companies who continue to pollute the atmosphere. The only way for them to avoid paying this tax burden would be to reduce their carbon emissions. In place, the tax policy works as a negative stimulus towards changing the attitudes and mindset of individuals for the better good. Considering that these people are between the most influential in the business sector, specifically in Australia's major industries, there is a strong likelihood that they can also persuade their employees, business associates, and customers into following their lead.