Carbon Emissions
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Carbon emissions come from burning of fossil fuels such as coal, oil and natural gas which contributes to global warming. Every time people turn the ignition on car, board an airplane or when turn on a light switch, people are creating carbon emissions.
Regulatory approach is a direct government approach. Regulations would involve bringing in new government rules such as command and control which companies and families have to follow. For example, regulations could set new standards for vehicle fuel economy; so that automobiles use less fuel to drive the same distance and so release less carbon into the air. Regulations can also be introduced in such a way that companies are given an incentive to reduce their carbon emissions as much as possible. Another example is the context of carbon emissions is the Corporate Average Fuel Efficiency (CAFÉ) standards, which mandate minimum fleet mileage standards for motor vehicles sold in United States. Market approach is to put a price on carbon, that its become expensive to release it into the air. Pricing carbon give people and companies to find ways of reducing these carbon emissions. There are two ways in which a price could be put on the carbon by tax or cap-and-trade system. Market mechanisms seek to put a price on carbon emissions and so provide a strong financial incentive to reduce them. This could be done either by taxing carbon emissions, or through a cap-and-trade mechanism whereby businesses must obtain permits giving them the right to pollute to a certain level – allowing companies which reduced emissions dramatically to profit from selling their unused permits to their more polluting peers. A carbon tax would make people to pay the government a sum of money for every ton of carbon they release into the air. A cap-and-trade system divided into two parts, which set an overall limit -the cap part- on the amount of carbon could be emitted each year. Companies would give permits that allow then to release a certain amount of carbon into the air. They would be fined very heavily if they went over their limit. Companies which would not reduce their emissions to the level allowed in their permit would have to but more permits in a carbon market. They would be buying from other companies which had successfully cut their emissions and so had spare permits to sell -the trade part-. *The EU operates a cap-and-trade system as part of its commitment to reduce carbon emissions.)