Benefits of Putting Carbon Tax in Ohio State 12Benefits.docx

Benefits of Putting Carbon Tax in Ohio State 12
Benefits of Carbon Tax in Ohio State
Sujan Kumar Karki
BSC
Summer 2017
Capstone Advisor: William J. Doyle, Ph D.
Copyright by:
Sujan Kumar Karki
2017

To: Meena and Laba Karki
Acknowledgement
I am forever indebted to by mom Meena Karki and Dad Laba
Karki for all the support and sacrifices they have provided me
throughout my career. I am thankful to Prof. Dr William J
Doyle for his constant support and generosity. I really admire
his patience throughout this project. I will always be thankful to
my friends Tej Prasad Ghmire, Nikita Dhungel for their
motivation, support and guidance for completion of this project.

LIST OF ACRONYMS
ACES: American Clean Energy and Security
CO2: Carbon dioxide
CO: Carbon monoxide
EPA: Environment Protection Agency
GHGs: Greenhouse Gases
GDP: Gross Domestic Product
ATM: Automated Teller Machine
MW: Megawatt
EU ETS: European Union Emissions Trading System
RGGI: Regional Greenhouse Gas Initiative
SCC: Stop Climate Change
Table of Contents
Abstract7
Introduction7
Effects of emissions on climate change10
Industrial processes10
SOLVENTS AND OTHER PRODUCT USE11
Agriculture11
Wastes12
Land use and forestry13
Transportation13

Energy intensity14
CAP- AND- DIVIDEND – The basics16
Permits versus Taxes19
Potential uses of carbon pricing taxes in the state level20
Tax cuts20
Returning money to households or electricity consumers21
Deficit reduction21
Investment in combating climate change21
Transitional assistance22
Carbon Pricing Design Features22
Scope22
Point of regulation23
Reporting and verification23
Setting the price or cap24
Changes in the carbon price over time26
Cost- containment mechanism28
Offsets28
Price ceiling and floors in carbon taxing29
Complimentary policies30
Addressing emissions and sources outside the program scope30
Energy efficiency30
Regulations and standards31
Investing in enabling technologies31
Research and development32
Benefits of EPA standards in Ohio State32
Primary Policy Options34
Next steps35
Conclusion36
References39

Abstract
Ohio is one of the states in the US that advocates the use of a
kind of energy that does not cause any effects on the climate
change. Due to the diverse effects of climate change many
states have created taxes which will take care of the
environment. Ohio is the first state in the US that rolled back
clean energy mandates when they signed a bill that is called SB
310 to be a state law. The law was backed by deep- pocketed
Ohio- based utilities as well as conservative groups. The bill
came exactly a week after the EPA announced tough new rules
on carbon emissions that were coming from power plants and
other industries or factories. Looking at it closely, the impacts
on consumers of a cap on carbon emissions are different across
the income levels as well as in the different states of the US.
This paper is going to look at the benefits of putting Carbon tax
on Ohio State (Governor, 2014). The history of Carbon tax will
be looked at in different levels and the ultimate role that it is
playing in the state. In fact, pricing Carbon dioxide as well as
other greenhouse gases (GHGs) is meant to address the market
failure that is inherent in the state’s economy that does not
price damaging emissions. Of course, audiences understand that
much has been given on the design of a federal- level carbon
tax. This paper is however going to try and adapt these findings
to the state of Ohio having been motivated by the pending
federal regulations that makes it an obligation for the states to
have the regulations implemented. The State should have policy
discussions with commitments that will lead to long – term
emission targets as well as the state budget shortfalls that could
help develop new revenue to the state.
Introduction

Any state based carbon tax that is set above prevailing
emissions allowance prices in state cap – and- trade programs
and applied economy wide could be used to raise enough
revenue to play an important and significant fiscal role in the
state. This is because $20 per ton tax on energy- related CO2
emissions is known to raise around 2 or three % of GDP. The
issue about taxation in Ohio largely depends on who is bearing
the economic pain of the tax since the upstream producers as
well as distributors will have to pass their costs to the ones who
buy their products.
Thus, in Ohio, there is a system which maximizes coverage and
minimizes the number of tax payers and coincides with the state
tax reporting obligations. There is tax treatment on carbon that
is embodied in fuels, on electricity as well as the goods that are
imported from the state. The state needs to harmonize policies
to avoid distortions on trade and investment. In addition, it is
wise to determine how carbon tax can be featured in the state
implementation plans so that there can be a Clean Power Plan
and EPA rules under Air Act. With the introduction of
Greenhouse gases, there is a great disruption on the climate.
Other than talking about air pollution and poisoning, it is good
to note that the largest component of GHGs which is Carbon
Dioxide can contribute to ocean acidification and hence, all the
livestock in the water bodies may be affected (Q. Ashton Acton,
2013). Thus, when these emissions are released from their
chemical compounds into the atmosphere, there are diverse
effects that they can cause and the largest effects are suffered
by human beings, animals both that are on land, air and water as
well as plants in general in simple terms, the whole ecological
system is affected in the negative way.
There are some areas where estates are not independent and they
are entangled in the federal regulations on power plant carbon
emissions thus creating action-forcing situations that may raise
the appeal of a policy option that will cause many effects among
them being producing environmental benefits and address some

pressing fiscal needs. Other than carbon, other gases that are
taxed include methane that comes from landfills and coal beds
(Q. Ashton Acton, 2013).
In reality, the basic formula for taxation is quite universal and it
is just simple and it helps in building on the three known
fundamental components as well as a simple mathematical
formula:
Tax X Tax Rate =Tax Revenue
When the tax is going to be generated from any form of energy
products, it is energy related tax. It is clear that the tax base
may differ according to the design of the tax (Kreiser,
Andersen, Olsen, Speck, & Milne, 2015). Thus, for the carbon
tax, the tax base can either be from the carbon content of the
fuels that are concerned like Carbon Dioxide. This can make the
tax to be limited to fossil fuels only like nuclear power as well
as hydro power. At times, the tax can be defined in terms of the
market price per unit of energy or at times, it can be defined in
terms of volume of the fuel. When it comes to climate change
situation, using CO2 or CO the tax base will be the one to be
likened since it offers a direct link to the environmental
problem which is the emission of CO2.
Most of the gases that are dangerous and poisonous come from
combustion of fossil fuels as well as other effects such as global
warming. It should also be noted that the cap- and- dividend
would be able to return carbon revenue in exactly equal measure
to each citizen in the state which is contrasted to the fact that
the American Clean Energy and Security Act that was passed by
the House of Representatives in June 2009 is said to be
allocating revenues as free as free permits in a variety of ways
as well as uneven effects across households. According to the
Act, the Congressional budget office of the same year estimates
that under ACES, about 2/3 of the carbon revenue should be
allowed to flow to households in the top quintile of the national
income distribution (Bruins & Heberling, 2013).
In this sense, the visibility of the transfers of carbon revenue to
the public may be more essential than the net distributional

effects of the climate changes policy. The dividends to the
public in the form of checks in the mail of even the bank
accounts will offer higher physical profits to the families and
households against what they can assume to be the effects of
higher fossil fuel prices. Thus, the transfers from the ACES
through the myriad routes like the capital gains to corporate
shareholders as well as rebates in electricity bills will be less
important (Ziemba & Schwartz, 2014). In fact, this is done so as
to promote economic fairness in the state as well as state
finance transparency. Transparency is also enhanced when the
cap- and- dividend provides a way to secure durable public
support for an effective policy to the weaning of the economy
from depending on fossil fuel sources. In this matter, the state
matters jump the boundaries to the whole nation matters, such
as a proactive US policy which will be very important in
reaching a better international agreement to confront the global
challenge of climate change.Effects of emissions on climate
change
There are a number of gases which are involved in climate
change and which are dangerous when they are emitted to the
environment either to the air, land or even water bodies. The
following are areas which are responsible for emissions in Ohio
State:
Transportation sector in Ohio accounts for approximately 32
percent of the total CO2 emissions, electric power generation is
another sector that accounts for 35 % and is the largest source
of CO2 emissions. Industrial end- use sector on the other hand
accounts for 27 %, industrial use, agricultural production and
others as follows;Industrial processes
In 1990, the industrial processes emissions was less compared
to that of 2008 that had been increased to 5.1 %. This increment
is not logical owing to the fact that iron and steel production,
metallurgical coke production has also been reduced, aluminum
production, electric transmission and distribution and even the

HCFC-22 production have all been limited in the state.
Although all the other productions have been reduced, cement
production has been increased and this is known to cause an
increase in the CO2 production. In addition, the use of
substitutes for the ozone depleting substances which have
rocketed from the small traces in 1990 and are slowly going up
which is also leading to higher percentages of CO2 emissions in
the state. An example is shown in the chart below;
Solvents and Other Product Use
By the year 2008, solvents and other products only comprised of
0.1% of nitrous oxide gas emissions and although it is not that
much, nitrous oxide gas is very dangerous and can be
poisonous, possibly leading to acid rain (Governor,
2014).Agriculture
The agricultural contributions come from many different angles
of practices that are believed to make agricultural products
better. For instance, the enteric fermentation in domestic
livestock, from livestock manures management, from
agricultural soil management such as burning of agricultural
residues and even during rice cultivation (Geri & McNabb,
2016). In the current face of agriculture, the use of fertilizers is
very common. The fertilizers all have different compositions
which when they are emitted into the water bodies (which is
where they end up) they cause diverse effects. In fact, in the
whole of the US, agriculture is the largest contributor of CO2
emissions, accounting for around 68 % of the total emissions.
Methane emissions are also known to have increased but since
the number of livestock is being decreased due to a number of
reasons, the methane emissions are also being brought under
control.Wastes
By the year 2008, landfills were the second largest source of
emissions in not only in Ohio but in the rest of the US.
Although there are new technologies which are being used and

which are seeing the decline of the CH4 gas emission, it is still
having a high rate of emission and it is a big threat on climate
change. The same is true about wastewater treatment in which
case a number of chemicals are used in the treatment
procedures. At times, it is hard to have the emissions brought
under control since their uses can be approved, such as in waste
water treatment, but since they are leading to more diverse
effects, there can be other ways of water treatment that can be
invented such that emissions can be reduced as shown below;
Land use and forestry
While we tend to think that land managing is the best practice
ever, it is better to note that there are some effects which they
cause. For instance, forest management practices like tree
planting and agricultural soil management can be some of the
activities which lead to emissions. Land filling yard and food
scrap are also activities which cause CO2 emissions which is
ranging higher in the state. Reforestation is also known to cause
an effect and contribute to missions and well as sequestration of
carbon by urban trees that is ranking very high in the rates of
emissions they make which accounts to almost 90 % as the
years are also pushing.
Transportation
All the modes of transport apart from cycling and walking cause
emissions. In fact, this sector needs to be looked keenly into in
the state of Ohio, since it is the main cause of emissions (Bruins
& Heberling, 2013). There are passenger cars which lightly
account for about 33 %, there are also light duty trucks that
account for about 29 %, freight trucks on the other hand account
for almost 21 % and commercial aircraft which accounts for
about 7 %. This sector is also seeing an ever growing increase
in carbon emissions since the number of cars, trucks and even
the motor cycles and aircrafts keep growing. Everyday
movement is made by either of these modes of transport and the

emissions are largely alerting. However, there is a chance to
reduce these emissions in the transportation sector since the
number of miles travelled per day has been reduced which is
thought to have an impact on the emissions. The information
can be represented in the following chart;
Energy intensity
Looking at the analysis on the state Department of Commerce,
there are different economic sectors that contribute to the
production of carbon emissions and that the carbon emissions
can have very intense effects on the climate and the
environment in general. In most cases, manufacturing plants are
a major contributing factor in this matter and the fuels they use
undergo combustion to give rise to such dangerous and
poisonous emissions (Laufer, 2012). According to the reported
from the Department of Commerce in the state, industries have
seen a decrease in the emissions in the past decade due to the
fact that the use of electricity has been implemented and the
matter is transferred back to the extraction and energy
generating industry and not the manufacturing and production
industries. However, it should be noted that the emissions
varied across the industries since not all of them were using the
same kind of fuel or even the same amount. Thus the size and
the type of production as well as the fuel used brought out the
variations in the amount of emissions they produced.
These gases combined can cause diverse effects on the
environment. If they are not controlled in time, the whole world
will be out of control. In the first place, global warming is a big
threat not only in the US but to the rest of the world. The Ozone
layer is fast thinning and the sun is becoming hotter and hotter
by the day. The ultra- violet rays are also increasing their
effects by the day and the effects are reaching not only human
beings but animals of all sorts as well as plants. The water
bodies are not less affected as the water can be acidifies which
will make the living stock in water to have it hard to respire and
eventually, they die. The whole ecological system is getting

affected as so many animals especially those in water bodies are
dying at high rates while those on land and air are lacking food
due to lack of rain and other effects. On the other hand, there
are some direct human health impacts which can be inferred to
the people when these compounds are emitted into the
atmosphere (Bartholomew, 2015). However, concerning the
climate, there is a possibility that there can be photo chemical
smog and acid rain. When acid rain is made possible, one can
imagine the effects which can be experienced on earth, owing to
the fact that, almost everything on earth is driven by rain.
There are many sources of emissions and they range from
mineral extraction where fuel is used and after combustion, the
air is more than polluted. In fact, different mineral extraction
leads to different emissions but all of them have almost the
same effects. In addition, the industrial and factory as well as
manufacturing plants all use fuel at some point in their
production line and the result is that air is polluted and it is
poisoned. The effects extend to be causing factors of acid rain
which in turn affects plant and animal life; it also leads to
global warming. Thus, the taxation of energy plants range from
energy extraction zones, industrial plants, manufacturing plants
and all the rest of energy dealing zones. The energy exportation
dealing is also taxed such that is a company is involved in
extraction and exportation of energy, it can be taxed at both of
these levels.CAP- AND- DIVIDEND – The basics
A policy that is known to limit the supply of fossil fuels is
known to raise their price. In fact, the economic reasoning that
binds the price to scarcity holds true, even if the cause of
scarcity is not regarded. If the price is increased, the production
is cut (Governor, 2014). If the lawmakers put a cap on the
carbon emissions from the combustion of fossil fuels it can lead
to increased prices. There is a contrast between high prices that
are as a result of carbon cap and high prices that are caused as a
result of different other forces. On one hand, the high prices
that arise from a carbon cap are normally a burden to the

consumers and it will not affect the general economy. They are
transferred from the general economy to the consumers.
The extra costs that the consumers are paying normally go to
the holders of carbon permits. It is clear that unlike price
increasing as a result of market forces, the price increasing as a
result of carbon cap is known to recycle the dollar not only in
the state of Ohio but in the whole of the US. When these
happen, there are three agencies which benefit;
· These are benefits to corporations especially if the permits are
given to corporations without any pay.
· Most firms which are energy dealers and their shareholders
will also get to benefit
· It can also be a benefit to the government since the permits
will be auctioned and not just given away and the value of the
permits will be offered back to the government as profits
(Governor, 2014). On the other hand, the money can also
benefit the general public, but it will depend on what the money
is used for public expenditure or even cutting taxes and thus,
the person who is going to benefit from this money will largely
depend on his relationship with the tax in place and what the
cash is used for and how.
There is a great possibility that the consumers will be either
partially or even fully insulated from the impact of high prices
especially if the revenue from permit auction is given back to
the public as equal per capita dividends (Laufer, 2012). The
household that have small carbon footprints will have more
dividends than they are paying higher prices. This is a policy
that is called a cap- and – dividend policy. It is approximated
that in the next forty or so years in the future, the value of
permits under a cap will amount to trillions of dollars, then its
mechanics (mechanics of cap-and-dividend A carbon cap) will
be administered upstream without any challenges and with the
need of permits which are supposed to bought by the first
sellers of fossil fuels into the state economy.
The cap is meant to reduce the supply and raise prices of fuels,
and the result is that the market signals will spur and household

and families will start investing in clean energy. In most cases,
the cap- and- dividend policy, the permits are auctioned by the
state government and almost all the revenue from the permits is
given back to the public in terms of equal payment per person.
It’s name according to the economists is a `feebate’
arrangement, which means that individual persons pay fees that
is based on their use of a scarce resource that is owned in
common and as a community then the fees is rebated in equal
measure to all the co-owners. The fee is set by the carbon
footprint of the household and the owners in partnership are all
the people of the state.
Dividends can be disbursed through ATM cards such as those
used in almost all the states to get access to Social Security
funds. When they go to the ATM persons are able to check the
auction revenue that was deposited in their accounts and they
can also withdraw cash when they like. In Ohio State, auctions
can be held monthly or even quarterly when the number of
permits that are to be auctioned being reduced slowly as the
carbon cap becomes tight over time (Agriculture, et al., 2014).
This can help the holders to bring fixed quantities of fossil
carbon into the economy of the state in a given time such two
years from the real date that purchases are made. The firms will
only be able to buy the permits that can be auctioned, bearing in
mind that permits cannot be traded. There is no permit in fact
which can be sold, ranging from driving permits, gin permits,
landfill and disposal permits and even parking permits cannot
be bought or sold in markets, since they have legal concerns
which and names which cannot be transferred in any manner to
another person.
There is a big need for firms to be balanced when it comes to
receiving permits. Since all of the permits are given free of
charge, their needs is based on a given formula such as historic
emissions so that no firm gets more than they need nor there can
be another that will have less than they need. Thus, trading is
very essential to redistribute them from one holder to another. If
for instance 100 % of carbon permits are auctioned then permit

trading will not be needed.
Trader profits have not been known to drive a wedge between
the amount paid by consumers in higher prices and the amount
of available revenue that can permit sales. There is no carbon
revenue that can be siphoned off by speculators or trading
firms. There are times also when non-tradable permits can
safeguard the policy from the perception or the reality of market
manipulation by the stakeholders who are seeking to take part in
the system. Dividends against other uses of carbon revenue
other than returning 100 % of carbon revenues to the public, the
policy makers could allocate some revenue to some other uses
within the state such as investing on clean energy, offsetting the
impacts of higher fossil fuel prices on the purchasing power of
the state. The transitional adjustment aid to workers,
communities or even firms that are adversely affected by the
transition away from the fossil fuels as well as other
government expenditure, the tax cuts or the reduction of deficit
and therefore, a step should be taken to ensure that all is in
place.Permits versus Taxes
Tax is the only alternative way of putting a price on carbon. In
this sense, carbon tax can be defined as a permit with a fixed
price (Bartholomew, 2015). The cap – and- permit policy sets
the amount of permits that need to be emitted and allows a
determination of the permit price. In carbon taxes, higher prices
offer a market signal that encourages energy efficiency as well
as investment in alternative energy. Therefore, the policymakers
have a responsibility to oversee the future demands of fossil
fuels bearing in mind that there will be new technologies that
will be available and if the economy will zoom towards any
direction, thy will be able to achieve results that are good. It is
upon the policymakers to determine if they want to set the
quantity of permits or to set the carbon price. However, it is not
easy to predict the future demand on energy since there are so
many uncertainties about the demand in the future. Thus, the
relationship existing between quantity and price will not be

predicted as well.
The ultimate and paramount aim of climate policy is to reduce
emissions so that not only the state of Ohio but all the states of
America should reach the 2050 target. A convincing case needs
to be made so that the right quantity is got and the right number
of permits is set so that their prices will be varying according to
their demand. It is also good to note that at times, politics may
be a major contributing factor to reduce the carbon tax to be too
low basing their decisions on the optimistic projections of the
resulting emission reductions (Marien, 2013). The politics can
also influence the undermining of the efficacy of a cap- and-
permit policy, happening in two major ways;
· In the first place, they can set the cap at a level that is
inadequate and which will not enable them to achieve the set
emission reductions
· Secondly, they can allow `offset’ where instead of curtailing
fossil fuels firms are given credits for other actions like
planting trees, slowing the rates of deforestation or even
reducing carbon emissions not only in their states but also in
other states and in the whole of the US (Kreiser, Andersen,
Olsen, Speck, & Milne, 2015).
Then, the permits case rather than taxes is premised on a very
tight cap which can reduce emissions so as to meet the 2050
target. In the case where policy makers choose to go by the
carbon tax, there will be a challenge of revenue
distribution.Potential uses of carbon pricing taxes in the state
levelTax cuts
One of the major areas where people suffer is in payment of
taxes. If the revenues from carbon pricing can be invested in
this sector, then it can fund cuts in other tax rates. The taxes on
labor as well as capital can reduce the income of persons and
businesses and will eventually decrease incentives to engage in
productive activities like in work and investment. All these
taxes are different from carbon tax that helps to correct market
failure and can also reduce the incentive to reduce emissions

that come from greenhouses. Returning money to households or
electricity consumers
Likewise, the revenue that is got from carbon pricing can be
returned to households and families through the lump sum
payments that is normally divided equally to the citizens. At
times, alternate metrics is used to divide the money but they
have to ensure that each household gets that sum. Because of
the fairness and the simplicity involved in the tax- and-
dividend approach, it has gained popularity and it is the most
common approach used in distribution of the revenue that is
taxed from carbon pricing. The households in the state are
either given the tax refunds or they are sent quarterly or annual
checks. At times, the approach ensures that low- income
households receive more income as they spend on tax.Deficit
reduction
The large national deficits are known to reduce the economic
rates by increasing interest rates and inhibiting the private
sector investments. This will then increase the future tax
burdens to make pay offs especially on the principal or even on
the interest on the debt. With the revenue from carbon pricing,
the annual deficit can be reduced and the diverse economic
effects caused by the large deficit rates could be brought under
control.Investment in combating climate change
The revenue from carbon pricing can help in stimulating the
innovation in low- carbon technologies such as renewable
energy that is becoming very common in other states and even
in the whole nation. In addition, carbon pricing can offer
revenue that can be helped in promoting the development and
development, deployment and the deployment of breakthrough
technologies that will see to the fact that the climate is well
conserved and managed (Davis, 2014). There is also a need to
invest in infrastructure that can help communities adapt to the
effects of climate change that are now unavoidable such as

extreme weather in terms of scorching sun, waves and sea level
rise.Transitional assistance
There are some persons in the state that are mostly affected by
the carbon price. For instance, there can be job training in the
industries where there are anticipations of losing jobs such as
coal mining industries. There are also some households,
businesses and regions of the state that are entirely dependent
on production and consumption of fossil fuels in order to
smooth the transition to a lowed carbon economy. These
revenues can also be utilized to offer assistance to industries
that face an increased competition from foreign
competitors.Carbon Pricing Design Features
An establishment of carbon pricing program needs a number of
decisions on the policy structure as well as the design. The
following can be used as the basis of decision making regarding
carbon pricing. It is good to note that each of the elements is
relevant to both sides of carbon and tax as well as a cap- and-
trade program;Scope
This refers to the portion of overall greenhouse gas emissions
that are covered by a program. In order to make a decision on
the scope, there is a need the policy makers to decide on;
· Whether the program is going to only cover CO2 emissions or
whether it will also cover other greenhouse gases
· The economic sector that the program is going to cover
· If all the emitters are only the ones that are above a certain
threshold of emissions are regulated or if they are basically not
regulated.
In most cases, if the scope is broad, then there is great
expectation that the reduction of emissions will also be great
from a given carbon price. In addition, a broad scope means that
a certain quantity of emissions reduction will be achieved at a
reduced cost.Point of regulation

There are different points of the economy that carbon pricing
can be applicable. In an upstream approach, the carbon price
can be applicable when the materials that will lead to emissions
first enter the economy, such as at coal mines, at the oil and gas
drilling sites or at the entry points of fuel imports. This
approach is known to allow a big fraction of energy carbon di
Oxide emissions that should be covered while at the same time
regulating few entities (Bartholomew, 2015). On the other hand,
a downstream approach will be applicable to the carbon price
at the exact points where the emissions occur. This can then be
applied at power plants as well as at manufacturing areas. At
times it is hard to have it applied to personal buildings, cars and
even trucks. Even so, an integrated approach can be used which
is a mixture of both the upstream and downstream approaches.
Examples where an integrated approach can be used is in oil
refineries and well as in natural gas processing plants.Reporting
and verification
An established emissions reporting and verification system will
be a very good way to carbon pricing decision making.
Although reliable reporting systems are in place in many areas,
it should be noted that the addition of carbon price creates
direct economic effects for both of the recovered areas and this
may be known to reduce the tax burden. There are many given
ways in which verification can be mad possible, ranging from
independent third party verification to self- certification that
has very strong penalties.Setting the price or cap
Carbon tax and cap- and- trade programs need that there is
setting of prices and emission caps. By setting the tax level or
the cap level needs that there is a balance from many
considerations including from the political, economic,
environmental and even legal grounds. In the climate change
perspective, it is right to begin from any of the considerations
that are targeting emissions from the estimation of the arrears
caused by GHG emissions. On the other hand, the non- climate

policy priorities such as tax reforms, there may be a given
amount of revenue that is needed in order to set the price. Thus,
it can be easy to increase the stringency of a given program
slowly over a given period of time to adjust the price or the cap
in case conditions change. The many other factors that are to be
considered include allowing offsets such as the emissions from
entities that are indirectly, by the policy. For instance, the
enhanced carbon sinks that are achieved by tree planting can
help in reducing the costs of a policy, but it can also make it
hard to have emissions reduction. Lastly, the policy makers are
supposed to look at the broad policy context where carbon
pricing is introduced that includes a complimentary policy that
may be required to reduce the emissions even further (Marien,
2013).
It is also important to note that the price or a cap is not going to
be a single number, but it is supposed to be a trajectory which
means that it will have an increasing tax rate or even a
declining cap over a period of years or decades. Thus, as much
as all the factors are to be taken into consideration, they should
show a given balance in terms of politics and economy so as to
try and ease economic transition aiming to start a low price and
allowing the price to go up over a given time so that emissions
can be reduced. Together with the rest of the States in the US,
Ohio State has set a 2020 target in which it aims to completely
offset the carbon emissions. If these rates are achieved by this
time, then they can be the basis of trajectory of emissions caps
and modeling can be made possible especially in the estimation
of the resulting carbon price or even to offer a suggestion of a
perfect carbon tax trajectory. On the other end, the long-term
targets such as that of 2030 and that of 2050 can be brought
under use as well.
At times, it becomes hard to look at these matters into the
future, especially making the targets work. For instance,
translating between carbon prices and emission levels on a long
term period is not really practical. Whether the determination of
the effects and consequences of the emissions over time of a

given tax system or even the prices that will be as a result of a
carbon cap is hard to predict due to a number of future
uncertainties that are involved in trying to model long- term
developments in the economic energy systems. In reality,
setting a carbon price based on damages that are brought about
by climate changes are aiming at ensuring that the full costs of
climate change are included into the prices of carbon intensive
products and goods and even the services that are related to
carbon.
Looking at the federal government of the US, they have made
estimation to the `social cost of carbon’ so that they can gain
insight into a key economic question and what damages are
created by increased carbon missions. Many countries within
Europe and outside have also followed suit so that they can take
collaborated efforts in reducing the carbon emissions. This is
majorly driven by the fact that when the effects are suffered, it
is not Europe alone that will suffer but it is the whole world.
For instance, if the ozone layer is affected such that it undergo
extreme thinning, all the countries and in fact the world will be
affected. Thus, the attempts of SCC are to possibly identify and
quantify the impacts that climate change could bring for
centuries in the future (Bruins & Heberling, 2013). The impacts
are known to have negative effects on public health,
infrastructure and even the environment. In addition the impacts
should be translated into monetary terms and it is not counted
on the present value so as to evaluate the cost of increasing
emissions in the present value of cash. In the national
government, the Office of Management and Budget has given
direction to the agencies involved to make use of SCC estimates
in knowing the quantity and the intensity of the benefits of
reducing carbon emissions as part of their regulatory
consequence analysis.
In most cases, the resulting estimates of SCC are very wide
because of the main risks surrounding the impact of estimates
and owing to the fact that the estimates are only approximations
and they cannot be relied as the actual figures. This is also

supported by the fact that there is no enough information that is
needed to translate given arrears into monetary values
(Governor, 2014). For the decision makers and policy makers
that are motivated by the need to look at climate change
available for given policy purposes like the payments to be
made on reductions in payroll or the corporate tax rates or even
provision of funds for infrastructure offers an alternate
approach used to determine the level of carbon price. Modeling
is needed in order to get the level of price and its trajectory
over time to be right. In fact, if there is certainty in setting
prices in carbon tax, the impact of the price on the future
emissions and hence the revenues in the future need to be
modeled. On the other hand, if for instance the level of
emissions will come low faster than the price could rise in a
given time, then there could be a decrease in revenues collected.
On the same side, the net government revenue can be impacted
in any of the program adapted by the extent of the tax payments
of even the allowance sales deductible business
expenses.Changes in the carbon price over time
The program to be adapted should include a price that is going
up or a cap that is going down over a given period of time. If
there is a price that is starting low and increases in a way that is
predictable for a relatively long period, then the current
economic effects of the policy on the present activities that are
muted since the industries as well as the consumers can over
time adjust to the carbon prices. Then, there will be a signal
that is sent to the economy; that the continued emissions will be
costly in the future years. At times there can be a shift in
investment as well as the economic activity which needs to take
into account the future costs and revenue streams. On the other
hand, a decreasing cap operates in the same way, although with
higher risks (Governor, 2014).
Policymakers need to make a balance on the objectives of
competition especially on maximizing emission reduction.
Reduction of emissions can prove expensive than what is

expected; the result can be that the economic and the
environmental outcomes vary from predictions (Marien, 2013).
For instance, when it comes to EU ETS as well as the RGGI,
changing the levels of economic task is possible and the
decreased natural gas prices that is meant that the emission
levels are below the caps. This is especially true with the RGGI.
The EU TS as well as the RGGI have however moved to reduce
their caps in the near future phases and or delay auctioning of
allowances so as to be able to address the unexpected low level
emissions. However, if the emissions reduction is expensive
than or if it is hard to afford, a tax can result in lower emission
reduction that the anticipated or a cap- and- trade program may
experience higher allowance prices. Unexpected situations may
also result to high prices in a cap- and- trade program or a
minimized emission reduction that result from a carbon tax.
Expecting these situations argues for inclusion of an adjustment
mechanism in the original program design that is meant to
minimize the ability for a disruptive and unplanned changes or a
cost maintenance mechanism.Cost- containment mechanism
In matters of confidence, price stability offers an important
measure, especially for those investing in emission reduction as
well as clean technology (Agriculture, et al., 2014). For
instance, in a carbon tax, this is one of the aspects of the
program. In reality, cost- containment mechanisms are known to
deal with concerns about severe price, fluctuations in a cap-
and- trade program. In case the prices increase so much in a
short time, they can result in a crucial economic harm. On the
other hand, if they become too low, they can offer desired price
signals for the low- carbon investment. In most design options,
the decision on if or not to include cost containment
mechanisms involving trade-offs that are discusses below for
offsets and price ceiling.Offsets
These are documented emission reduction that occur outside the
regulated sectors and can be used by regulated entities in lieu of

emission reduction that is covered by the system. It is clear that
offsets can be positively used in order to reduce program costs
since any regulated entity will make use of offsets when they
are less costly that the covered emission reductions. Even so,
the results that will be achieved are the same. In addition,
offsets can offer a way to bring into the program any sources
that are hard to be directly addressed. For instance, the overall
emissions that are coming from agricultural investments are
quite hard to quantify and even verify, however, when it comes
to individual actions such as manure management, then it is
easier to handle it.
Offsets are normally in most cap- and- trade programs, but they
tend to be looked at as being controversial since concerns on
whether the offsets represent emission reductions that would not
have been experienced. Whether to include offsets depends on
the intensity of trade- off between the lower compliance
expenses and the certainty of getting to the environmental
objectives. This is because climate change is the main issue that
is looked here and therefore, it should be given a priority. The
inclusion of offsets is an undermining factor to the uncertainty
especially when there are concerns on whether the associated
emission reductions are valid or not (Governor, 2014). In most
cases, offsets are more involved in cap- and- trade programs
than in the carbon taxes, even though they can be integrated in
either of the programs. On one side, the offset credits can be
used under the cap – and- trade to cover emissions the same way
that allowances do. On the other hand and under the carbon tax,
regulated entities can be allowed to make use of offsets in order
to reduce the quantity of emissions. This can come in terms of
the quantity of fuel or any other cause of emissions, in which
case the tax is assessed. Each of these uses and in either case,
there are rules and regulations that establish definitions of
offsets that are valid and their limits on their use; that is if they
exist.Price ceiling and floors in carbon taxing
In simple terms, a price ceiling sets a limit on how high or fast

allowance prices can rise while price floors sets the limit on
how low the prices can fall, and when they are used in
integration, they form a collar. Price ceiling and floor are
relevant only in a cap- and- trade programs and when it comes
to programs such as carbon tax it increases the certainty
regarding future prices. It should be noted that a given program
may have a ceiling, a floor or both (States & Administration,
2012). Ceiling is meant to prevent economic disruptions from
very high carbon prices and from prices that rise so fast. It can
be caused by higher emissions over time because the core
response to hit ceiling is likely to be an increment in the
allowances related to supply. On the other hand, a price floor is
used to prevent the total collapse of the carbon price and make
sure that clean energy investments are at least supported by a
given minimum carbon price. The demerit of price ceiling and
floor is that they cause inefficiencies in the markets for
emission allowances. It is the wish of the buyers and sellers to
decide on what price they can us and they can choose between
the prices higher than the ceiling or lower than the floor, but
this is not legally allowed. It is better that the policy makers
make a ken decision on whether there are any benefits on the
costs in the market inefficiencies and from their decision, they
can decide on which price tag they can use.Complimentary
policies
In real, a price on carbon can be a key factor of a broader
climate policy since it offers crucial signals through the
economy that approves a shift to lower carbon energy and other
carbon products. Other policies however are required in order to
aid a lead to cost- effective way to deep greenhouses gas
emission reduction in the future. Some of the complimentary
policies include;
Addressing emissions and sources outside the program scope
A single program in carbon pricing will not be able to address
all the sources of greenhouse gas emissions since some are far

dispersed or they can be hard to measure and quantify and
therefore, if they are included in the program, it can be a total
burden on the administration (States & Administration, 2012).
Thus, there is a big need for other approaches to come in in
order to reduce greenhouse gas emissions throughout the
economy and to encourage reduction from sources that are not
covered by the carbon price. Some of the approaches that can be
helpful are offset programs that allow crediting of emission
reduction tasks investments in R&D, incentive programs and
even in direct regulations.Energy efficiency
This policy has a number of documented market barriers like
split incentives that exist between building owners and tenants,
lack of proper information which hinders the achievement of a
full range of cost- effective opportunities. Thus, the application
of a carbon price will help in strengthening the market signals
and offer incentives for additional energy and they will not be
responsible for market barrier removal. Thus, so many programs
that presently offer incentives to efficiency may be needed even
if there is carbon pricing policy. The best thing in this is that
revenue from carbon can be used in expansion of these other
approaches such as in the case of RGGI program.Regulations
and standards
Carbon tax or the cap- and- trade program are thought of as
being cost effective in achieving emission reduction than other
traditional regulations and standards when it is assumed that the
relevant markets such as energy efficiency and innovation,
functioning in an ideal of competition. For the proposers of
carbon price and to those who see the policy as leading to
meeting of policy goals, avoiding these regulations and
standards might be seen as an objective to implement the carbon
price. It should be noted that at some occasions, the carbon
price may not be very effective of reducing greenhouse
emissions than other policies. This is because markets may not
be perfect and prices may not be effective.Investing in enabling

technologies
In fact, a number of emission reduction approaches are not
independent and they squarely depend on other technologies
that are likely to be influenced by the carbon price in one way
or the other. This can be attributed to the same market barriers
that hindered energy efficiency investments. For instance,
technical upgrades to the state grid can possibly lead to an
increase in the contribution of power from the distributed
electricity generation sources not forgetting renewable. In this
regard, a carbon price will not by itself offer enough incentive
for investment in the grid since any little benefit from the
increased distributed power generation will not accrue to parties
investing in the grid. Therefore, if there is public investment in
infrastructure as well as other enabling technologies, then there
can be a significant emission reduction opportunities across the
economies.Research and development
In order to reach and to achieve the goals and objectives that
are set in the long term planning on matters to do with energy,
there is a big need for technological innovation and
advancement. Increased rates of research and development will
help to reach these desired standards. In fact, it is even
anticipated that if there is deployment of new and improved
technologies, there can be a reduced cost of achieving long-
term emission goals.Benefits of EPA standards in Ohio State
The carbon pollution in the state can be expressed in two main
ways; as a mass-based limit designating a maximum number of
tons of CO2 that can be emitted by covered plants and by
allowing load growth over years as well as a rate- based limit
that can be best expressed as a number of pounds of Carbon
dioxide per megawatt or Mwt of electricity that is generated
from the plants that are covered for each given time frame
(Marien, 2013). Ohio utilizes the mass- based standard to
reduce its carbon pollution from all over the power plants from

102.2 million short tons in the year 2012 to figures below 74.6
million by the year 2013.
If this figure is achieved, it will be an equivalent of avoiding
carbon pollution from more than 5.2 million cars. By the
limitation of pollution, the state of Ohio will have benefits from
the expansion of its clean energy sources such as renewable
energy sources; it can also be able to add jobs to its clean
energy economy which is currently holding 89,000 workers.
EPA clean Power Plan is meant to reduce the while nation’s
carbon pollution mainly from the fossil-fueled power plants by
32 % by the year 2030. The reductions will be as a result of
making improvements in the coal plants such that there are not
much carbon emissions or there can be coal retirements as well.
In addition, there can be increased dispatch of the existing gas
plants and most importantly, the increase in use of clean energy.
The following table can be a summary of the information above;
Renewable sources and energy efficiency can be used in clean
energy. In fact, if there is investment in energy efficiency as
well as renewable energy, carbon emissions and pollution can
be cut down and this can help stimulate local economies across
the state and it can too create paying jobs (Agriculture, et al.,
2014). The Ohioans who are working in the clean energy sector
will get a yearly salary of % 3500 higher than the median salary
in the state.
According to dependable sources and research conducted on the
state, Ohio attracted about % 1.3 billion in private clean energy
for a period of four years starting from 2009 to 2013, which is
an indication that by the year 2030, the state could have
attracted over % 3 billion. Clean energy is a way or reviving the
state’s manufacturing sector by creation of trained and skilled
labor force which is believed to lead to development,
installation and maintenance of wind and solar energy
resources. If carbon pollution is curbed totally, not only will the
state of Ohio but also the whole nation will have a better health
as well as better environment that will also make living better

for the full ecology system. There are a number of health
problems that are arising from climate changes in Ohio. For
instance, flooding that is closely related to drinking
contaminated water which is as a result of extreme rainfall
events like acid rain (Agriculture, et al., 2014).The rising
temperatures also lead to increment of ground level ozone smog
making it very hard to breath. In Ohio State alone, reduction of
particle pollution could lead to saving 2800 lives and prevention
of 760 hospitalizations in the state by 2030.
Primary Policy Options
There are three policies which can be used to reduce carbon
pollution;
i. In the first place, there can be significant pollution cuts at
very low costs using energy efficiency and renewable energy.
Energy efficiency is known to be the most cost-effective choice
owing to the fact that clean energy investments are thought to
be the best especially in reducing customer energy bills. For
example, if a person is using solar energy, there is no cost or
bill that is to be paid the same the bills are paid when electricity
is used.
ii. Since regional approaches that create more trading markets
reduce costs, the state makes use of the policy and trading such
as from developing a regional plan to writing persons the plans
which have common elements as well as trading across borders.
In addition, regional consistency can help in reduction of
market distortions and pollution leakage across borders. This is
also known to reduce pollution rates in the state.
iii. The mass-based approach is known to be the lowest- cost
policy option in that the allowance value or the permit revenue
is given off by those who participate in the pollution process
and the revenue is re-invested for the benefits of the customers.
All these approaches are simple, they have lower costs and they
have all been tested. In addition, they are well known for their
high environmental integrity and they can easily be
interconnected across the state borders and regions. However,

since the mass- based approach is paired with crucial,
complementary clean energy policies, it can serve to fulfill all
the criteria outlined and therefore, it is taken to be the best
option of the three.Next steps
It is true that we are not able to predict what the future has, but
all the same, something must be done. This is the main reason
why policymakers, stakeholders of all sorts and other key
shareholders have highlighted many factors that can be
combined in order to increase the appeal of carbon pricing
policies such that the carbon emissions can be utterly reduced
(Toensmeier, 2016). Some of the areas which can be handled
include;
· Bipartisan support for tax reforms
· A successful carbon pricing program and approaches at the
state level and this can include ability for more programs and
approaches which combine effort and which spur compliance
with the new EPA power plant standards
· Creation awareness to the general public on the impending
danger and impacts of climate change so that each and every
person acts in a responsive way in reduction of emissions.
· Clearly stated goals especially aiming at deeper greenhouse-
gas emissions
· A strong desire for an alternative approach to regulate carbon
emissions so that they can be brought under control.Conclusion
It is also true that the state may have flexibility on decisions
making on reduction of pollution and it should be understood
that the benefits aim at making the environment better, improve
the economy and a benefit to electricity customers. The state
can follow the following steps in order to design a plan that can
help it to meet the carbon emission limits for its power plants.
The information can be presented in the table below;
Decision steps
Description
Choosing a rate-based or mass-based approach

There are a number of choices that the state can choose from
and adopt
Option 1:Rate-based, Blended Rate; In this choice, each
generator has to meet the state-wide emissions limit in pollution
per unit of electricity generated (lbs CO2 /MW). The fossil
power plants that emit above the intensity standard must buy
credits from generators or efficiency providers that are
operating below the standard.
Option 2:Mass-based, Existing Sources Only; Here, the state has
a total emissions limit (tons CO2) which is normally a fixed
amount. The state limit includes some amount of load growth
above 2012 levels. All the existing power plants have to hold an
allowance, issued by a state agency, for every ton of CO2
emitted. These allowances can then be auctioned, and the
revenue returned to customers or used to expand complementary
programs.
Option 3:Rate-based, Dual Rate; Each of the generators has to
meet applicable emissions rate limit (steam or NGCC) in
pollution per unit of electricity generated (lbs CO2 /MW). In
addition, fossil steam units that pollute above the steam rate
must buy credits from new non-emitting resources (including
efficiency) or incremental NGCC generation (above 2012
levels). NGCC units can only purchase credits from new non-
emitting resources such as efficiency.
Option 4:Mass-based, All Sources; The state may choose to
include new power plants in the mass-based standard. This has
the advantage of treating all power plants the same in electric
power markets, no matter when they were built. This option’s
limit is adjusted upwards to account for the emissions of new
power plants meeting any load growth that was not already
covered in the limit for existing sources, above.
Opt for an individual state plan or a plan linked with other
states
On another option, the state may decide to submit its individual
plan or coordinate with neighboring states on common policy
approaches. Some of the regional approaches include both

formal multistate plans and agreements to link, like adopting
common elements to facilitate trading. Linkage and trading are
easier under a mass-based approach. Merits of regional
coordination include:
• Lower cost since larger markets are efficient and reduces
costs.
• Improved environmental outcome since when regional
approaches avoid different price signals across state boundaries,
it helps avoid emissions leakage and higher-than-anticipated
national emissions.
• Stronger electric grid due to larger markets and additional
flexibility hence reducing concerns about electric grid
reliability.
• Equal treatment for generators, market participants, and
customers as well as consistent market signals, costs, and
benefits for all stakeholders.
Formulate state plan details as well as complementary policies
•By use of a mass-based approach, the state should also opt to
distribute allowances and either returns the revenue to
customers or give away the value to emitters. For instance, if
pollution allowances are auctioned to emitters, the state will
acquire revenue to be reinvested to reduce customers’
electricity bills through energy efficiency investments, rebates
and other state programs.
• Other complementary measures like clean energy standards
and improved utility rate designs can be adopted to help address
market barriers to investment.
• Lastly, complementary policies may be used to address
important equity issues for workers in transition and
disadvantaged people such as people of color, low-income
communities, and others.
References
Agriculture, U. S., Nutrition, Forestry, a., Revitalization, S. o.,
Conservation, Forestry, & Credit, a. (2014). Creating jobs with
climate solutions: how agriculture and forestry can help lower

costs in a low-carbon economy : hearing before the
Subcommittee on Rural Revitalization, Conservation, Forestry,
and Credit of the Committee on Agriculture, Nutrition, and F.
U.S. G.P.O., 2014.
Bartholomew, C. (2015). Challenge of China¿s Green
Technology Policy and Ohio¿s Response: Congressional
Hearing. DIANE Publishing, 2015.
Bruins, R. J., & Heberling, M. T. (2013). Economics and
Ecological Risk Assessment: Applications to Watershed
Management. CRC Press, 2013.
Davis, T. S. (2014). Brownfields: A Comprehensive Guide to
Redeveloping Contaminated Property. American Bar
Association, 2014.
Geri, L. R., & McNabb, D. E. (2016). Energy Policy in the U.S.:
Politics, Challenges, and Prospects for Change. CRC Press,
2016.
Governor, O. O. (2014). Coordinating Ohio Energy Policy and
State Energy Utilization. State of Ohio, Office of the Governor,
2014.
Kreiser, L., Andersen, M. S., Olsen, B. E., Speck, S., & Milne,
J. E. (2015). Carbon Pricing: Design, Experiences and Issues.
Edward Elgar Publishing, 2015.
Laufer, J. A. (2012). An Analysis of Ohio's Alternative Energy
Portfolio Standard. Oberlin College, 2012.
Marien, M. (2013). Future Survey Annual 1985: A Guide to the
Recent Literature of Trends, Forecasts and Policy Proposals.
Transaction Publishers, 2013.
Q. Ashton Acton, P. (2013). Issues in Environmental Law,
Policy, and Planning: 2013 Edition. ScholarlyEditions, 2013.
States, U., & Administration, N. O. (2012). State of Ohio,
Coastal Management Program: Environmental Impact
Statement, Part 2. Northwestern University, 2012.
Toensmeier, E. (2016). The Carbon Farming

Solution
: A Global Toolkit of Perennial Crops and Regenerative
Agriculture Practices for Climate Change Mitigation and Food
Security. Chelsea Green Publishing, 2016.
Ziemba, W. T., & Schwartz, S. (2014). Energy Policy Modeling:
United States and Canadian Experiences: Volume I Specialized
Energy Policy Models. Springer Science & Business Media,
2014.
Benefits of Putting Carbon Tax in Ohio State 1
Benefits of Carbon Tax in Ohio State
Sujan Kumar Karki
BSCComment by William Doyle: See Guidelines
Summer Fall 2017

Capstone Advisor: William J. Doyle, Ph. D.
Copyright by:
Sujan Kumar Karki
2017

To: Meena and Laba KarkiComment by William Doyle: Delete.
You have it covered in the Acknowledgements
Acknowledgement

I am forever indebted to by mom Meena Karki and Dad Laba
Karki for all the support and sacrifices they have provided me
throughout my career. I am thankful to Prof. Dr William J
Doyle for his constant support and generosity. I really admire
his patience throughout this project. I will always be thankful to
my friends Tej Prasad Ghmire, Nikita Dhungel for their
motivation, support and guidance for completion of this project.
Comment by William Doyle: Thanks you.
Use only Dr.
LIST OF ACRONYMSComment by William Doyle: These need
to be in alphabetical order.

ACES: American Clean Energy and Security
CO2: Carbon dioxide
CO: Carbon monoxide
EPA: Environment Protection Agency
GHGs: Greenhouse Gases
GDP: Gross Domestic Product
ATM: Automated Teller Machine
MW: Megawatt
EU ETS: European Union Emissions Trading System
RGGI: Regional Greenhouse Gas Initiative
SCC: Stop Climate Change
Table of Contents
Abstract7
Introduction7
Chapter 1 :Effects of emissions on climate change10
1.1 Industrial processes10
1.2 SOLVENTS AND OTHER PRODUCT USE11
Agriculture11

Wastes12
Land use and forestry13
Transportation13
Energy intensity14
CAP- AND- DIVIDEND – The basics16
Permits versus Taxes19
Potential uses of carbon pricing taxes in the state level20
Tax cuts20
Returning money to households or electricity consumers21
Deficit reduction21
Investment in combating climate change21
Transitional assistance22
Carbon Pricing Design Features22
Scope22
Point of regulation23
Reporting and verification23
Setting the price or cap24
Changes in the carbon price over time26
Cost- containment mechanism28
Offsets28
Price ceiling and floors in carbon taxing29
Complimentary policies30
Addressing emissions and sources outside the program scope30
Energy efficiency30
Regulations and standards31

Investing in enabling technologies31
Research and development32
Benefits of EPA standards in Ohio State32
Primary Policy Options34
Next steps35
Conclusion36
References39
AbstractComment by William Doyle: Abstract comes after title
page and copyright. It is a preliminary page.Comment by
William Doyle: See attachment to cover e-mail on Abstracts
Ohio is one of the states in the US that advocates the use of a
kind of energy that does not cause any effects on the climate
change. Due to the diverse effects of climate change many

states have created taxes which will take care of the
environment. Ohio is the first state in the US that rolled back
clean energy mandates when they signed a bill that is called SB
310 to be a state law. The law was backed by deep- pocketed
Ohio- based utilities as well as conservative groups. The bill
came exactly a week after the EPA announced tough new rules
on carbon emissions that were coming from power plants and
other industries or factories. Looking at it closely, the impacts
on consumers of a cap on carbon emissions are different across
the income levels as well as in the different states of the US.
This paper is going to look at the benefits of putting Carbon tax
on Ohio State (Governor, 2014). The history of Carbon tax will
be looked at in different levels and the ultimate role that it is
playing in the state. In fact, pricing Carbon dioxide as well as
other greenhouse gases (GHGs) is meant to address the market
failure that is inherent in the state’s economy that does not
price damaging emissions. Of course, audiences understand that
much has been given on the design of a federal- level carbon
tax. This paper is however going to try and adapt these findings
to the state of Ohio having been motivated by the pending
federal regulations that makes it an obligation for the states to
have the regulations implemented. The State should have policy
discussions with commitments that will lead to long – term
emission targets as well as the state budget shortfalls that could
help develop new revenue to the state.

IntroductionComment by William Doyle: Starts on a new page
and is numbered with Arabic numbers!
Any state based carbon tax that is set above prevailing
emissions allowance prices in state cap – and- trade programs
and applied economy wide could be used to raise enough
revenue to play an important and significant fiscal role in the
state. This is because $20 per ton tax on energy- related CO2
emissions is known to raise around 2 or three % of GDP. The
issue about taxation in Ohio largely depends on who is bearing
the economic pain of the tax since the upstream producers as
well as distributors will have to pass their costs to the ones who
buy their products. Comment by William Doyle: Reference?
Thus, in Ohio, there is a system which maximizes coverage and
minimizes the number of tax payers and coincides with the state
tax reporting obligations. There is tax treatment on carbon that
is embodied in fuels, on electricity as well as the goods that are
imported from the state. The state needs to harmonize policies
to avoid distortions on trade and investment. In addition, it is
wise to determine how carbon tax can be featured in the state
implementation plans so that there can be a Clean Power Plan
and EPA rules under Air Act. With the introduction of
Greenhouse gases (GHGs), there is a great disruption on the
climate. Other than talking about air pollution and poisoning, it

is good to note that the largest component of GHGs which is
Ccarbon dDioxide can contribute to ocean acidification and
hence, all the livestock in the water bodies may be affected (Q.
Ashton Acton, 2013). Thus, when these emissions are released
from their chemical compounds into the atmosphere, there are
diverse effects that they can cause and the largest effects are
suffered by human beings, animals both that are on land, air and
water as well as plants in general in simple terms, the whole
ecological system is affected in the negative way.Comment by
William Doyle: ReferenceComment by William Doyle: Clean
Air Act?Comment by William Doyle: Do you farm animals,
fish, all of the above? If you mean everything, choose a
different word than “livestock”.Comment by William Doyle:
What is the chemistry?
There are some areas where estates are not independent and they
are entangled in the federal regulations on power plant carbon
emissions thus creating action-forcing situations that may raise
the appeal of a policy option that will cause many effects among
them being producing environmental benefits and address some
pressing fiscal needs. Other than carbon, other gases that are
taxed include methane that comes from landfills and coal beds
(Q. Ashton Acton, 2013).Comment by William Doyle: What do
you mean?
In reality, the basic formula for taxation is quite universal and it
is just simple and it helps in building on the three known

fundamental components as well as a simple mathematical
formula:
Tax X Tax Rate =Tax RevenueComment by William Doyle: As
written, this doesn’t make sense.
Define what you mean by “Tax” and “tax Rate”
“Tax Revenue” I assume refers to the revenue from the carbon
tax rate.
When the tax is going to be generated from any form of energy
products, it is energy related tax. It is clear that the tax base
may differ according to the design of the tax (Kreiser,
Andersen, Olsen, Speck, & Milne, 2015). Thus, for the carbon
tax, the tax base can either be from the carbon content of the
fuels that are concerned like Carbon Dioxide. This can make the
tax to be limited to fossil fuels only like nuclear power as well
as hydro power. At times, the tax can be defined in terms of the
market price per unit of energy or at times, it can be defined in
terms of volume of the fuel. When it comes to climate change
situation, using CO2 or CO, the tax base will be the one to be
likened since it offers a direct link to the environmental
problem which is the emission of CO2.Comment by William
Doyle: Either … or > What is the or?Comment by William
Doyle: Poor wording
Most of the gases that are dangerous and poisonous come from
combustion of fossil fuels as well as other effects such as global
warming. It should also be noted that the cap- and- dividend

would be able to return carbon revenue in exactly equal measure
to each citizen in the state which is contrasted to the fact that
the American Clean Energy and Security Act that was passed by
the House of Representatives in June 2009 is said to be
allocating revenues as free as free permits in a variety of ways
as well as uneven effects across households. According to the
Act, the Congressional Bbudget Ooffice of the same year
estimates that under ACES, about 2/3 of the carbon revenue
should be allowed to flow to households in the top quintile of
the national income distribution (Bruins & Heberling,
2013).Comment by William Doyle: What gases are you referring
to?Comment by William Doyle: Re-write this so that there is no
underlining by WORD
In this sense, the visibility of the transfers of carbon revenue to
the public may be more essential than the net distributional
effects of the climate changes policy. The dividends to the
public in the form of checks in the mail of even the bank
accounts will offer higher physical profits to the families and
households against what they can assume to be the effects of
higher fossil fuel prices. Thus, the transfers from the ACES
through the myriad routes like the capital gains to corporate
shareholders as well as rebates in electricity bills will be less
important (Ziemba & Schwartz, 2014). In fact, this is done so as
to promote economic fairness in the state as well as state

finance transparency. Transparency is also enhanced when the
cap- and- dividend provides a way to secure durable public
support for an effective policy to the weaning of the economy
from depending on fossil fuel sources. In this matter, the state
matters jump the boundaries to the whole nation matters, such
as a proactive US policy which will be very important in
reaching a better international agreement to confront the global
challenge of climate change.Comment by William Doyle:
?Effects of emissions on climate change
There are a number of gases which are involved in climate
change and which are dangerous when they are emitted to the
environment either to the air, land or even water bodies. The
following are areas which are responsible for emissions in Ohio
State:Comment by William Doyle: What gaases?
Transportation sector in Ohio accounts for approximately 32
percent of the total CO2 emissions, electric power generation is
another sector that accounts for 35 % and is the largest source
of CO2 emissions. Industrial end- use sector on the other hand
accounts for 27 %, industrial use, agricultural production and
others as follows;Comment by William Doyle: List these in a
table and give the table a number and title and provide the
reference for the information.Industrial processes
In 1990, the industrial processes emissions was less compared

to that of 2008 that had been increased to 5.1 %. This increment
is not logical owing to the fact that iron and steel production,
metallurgical coke production has have also been reduced,
aluminum production, electric transmission and distribution and
even the HCFC-22 production have all been limited in the state.
Although all the other productions have been reduced, cement
production has been increased and this is known to cause an
increase in the CO2 production. In addition, the use of
substitutes for the ozone depleting substances which have
rocketed from the small traces in 1990 and are slowly going up
which is also leading to higher percentages of CO2 emissions in
the state. An example is shown in the chart below;Comment by
William Doyle: Poorly written.
What are the numbers?
What is the reference?Comment by William Doyle: What are the
substances and how does it relate to CO
Comment by William Doyle: Reference?
What are the MW numbers? Increases or totals?Solvents and
Other Product UseComment by William Doyle: How is this
relevant to your carbon tax. If it isn’t get rid of it.
By the year 2008, solvents and other products only comprised of
0.1% of nitrous oxide gas emissions and although it is not that
much, nitrous oxide gas is very dangerous and can be
poisonous, possibly leading to acid rain (Governor,

2014).AgricultureComment by William Doyle: Stopped the
review.
The agricultural contributions come from many different angles
of practices that are believed to make agricultural products
better. For instance, the enteric fermentation in domestic
livestock, from livestock manures management, from
agricultural soil management such as burning of agricultural
residues and even during rice cultivation (Geri & McNabb,
2016). In the current face of agriculture, the use of fertilizers is
very common. The fertilizers all have different compositions
which when they are emitted into the water bodies (which is
where they end up) they cause diverse effects. In fact, in the
whole of the US, agriculture is the largest contributor of CO2
emissions, accounting for around 68 % of the total emissions.
Methane emissions are also known to have increased but since
the number of livestock is being decreased due to a number of
reasons, the methane emissions are also being brought under
control.Comment by William Doyle: Make all CO2 to be CO2
throughout your paper.
What is the reference for this paragraph?Comment by William
Doyle: How do you know that and if true, what is the
reason?Wastes
By the year 2008, landfills were the second largest source of

emissions in not only in Ohio but in the rest of the US.
Although there are new technologies which are being used and
which are seeing the a decline of the CH4 gas emission, it is
still having a high rate of emission and it is a big threat on
climate change. The same is true about wastewater treatment in
which case a number of chemicals are used in the treatment
procedures. At times, it is hard to have the emissions brought
under control since their uses can be approved, such as in waste
water treatment, but since they are leading to more diverse
effects, there can be other ways of water treatment that can be
invented such that emissions can be reduced as shown
below;Comment by William Doyle: Use CH4 throughout the
paper.Comment by William Doyle: What chemicals are you
referring to and what is the problem?Comment by William
Doyle: Why do you say they are not under control? Are you
referring to CH4?
Comment by William Doyle: Where did this come from?
What is CHP?
How does it relate to water treatment?
Land use and forestry
While we tend to think that land managing is the best practice
ever, it is better to note that there are some effects which they
cause. For instance, forest management practices like tree
planting and agricultural soil management can be some of the

activities which lead to emissions. Land filling yard and food
scrap are also activities which cause CO2 emissions which is
ranging higher in the state. Reforestation is also known to cause
an effect and contribute to missions and well as sequestration of
carbon by urban trees that is ranking very high in the rates of
emissions they make which accounts to almost 90 % as the
years are also pushing.
Transportation
All the modes of transport apart from cycling and walking cause
emissions. In fact, this sector needs to be looked keenly into in
the state of Ohio, since it is the main cause of emissions (Bruins
& Heberling, 2013). There are passenger cars which lightly
account for about 33 %, there are also light duty trucks that
account for about 29 %, freight trucks on the other hand account
for almost 21 % and commercial aircraft which accounts for
about 7 %. This sector is also seeing an ever growing increase
in carbon emissions since the number of cars, trucks and even
the motor cycles and aircrafts keep growing. Everyday
movement is made by either of these modes of transport and the
emissions are largely alerting. However, there is a chance to
reduce these emissions in the transportation sector since the
number of miles travelled per day has been reduced which is
thought to have an impact on the emissions. The information

can be represented in the following chart;
Energy intensity
Looking at the analysis on the state Department of Commerce,
there are different economic sectors that contribute to the
production of carbon emissions and that the carbon emissions
can have very intense effects on the climate and the
environment in general. In most cases, manufacturing plants are
a major contributing factor in this matter and the fuels they use
undergo combustion to give rise to such dangerous and
poisonous emissions (Laufer, 2012). According to the reported
from the Department of Commerce in the state, industries have
seen a decrease in the emissions in the past decade due to the
fact that the use of electricity has been implemented and the
matter is transferred back to the extraction and energy
generating industry and not the manufacturing and production
industries. However, it should be noted that the emissions
varied across the industries since not all of them were using the
same kind of fuel or even the same amount. Thus the size and
the type of production as well as the fuel used brought out the
variations in the amount of emissions they produced.
These gases combined can cause diverse effects on the
environment. If they are not controlled in time, the whole world
will be out of control. In the first place, global warming is a big
threat not only in the US but to the rest of the world. The Ozone

layer is fast thinning and the sun is becoming hotter and hotter
by the day. The ultra- violet rays are also increasing their
effects by the day and the effects are reaching not only human
beings but animals of all sorts as well as plants. The water
bodies are not less affected as the water can be acidifies which
will make the living stock in water to have it hard to respire and
eventually, they die. The whole ecological system is getting
affected as so many animals especially those in water bodies are
dying at high rates while those on land and air are lacking food
due to lack of rain and other effects. On the other hand, there
are some direct human health impacts which can be inferred to
the people when these compounds are emitted into the
atmosphere (Bartholomew, 2015). However, concerning the
climate, there is a possibility that there can be photo chemical
smog and acid rain. When acid rain is made possible, one can
imagine the effects which can be experienced on earth, owing to
the fact that, almost everything on earth is driven by rain.
There are many sources of emissions and they range from
mineral extraction where fuel is used and after combustion, the
air is more than polluted. In fact, different mineral extraction
leads to different emissions but all of them have almost the
same effects. In addition, the industrial and factory as well as
manufacturing plants all use fuel at some point in their
production line and the result is that air is polluted and it is
poisoned. The effects extend to be causing factors of acid rain

which in turn affects plant and animal life; it also leads to
global warming. Thus, the taxation of energy plants range from
energy extraction zones, industrial plants, manufacturing plants
and all the rest of energy dealing zones. The energy exportation
dealing is also taxed such that is a company is involved in
extraction and exportation of energy, it can be taxed at both of
these levels.CAP- AND- DIVIDEND – The basics
A policy that is known to limit the supply of fossil fuels is
known to raise their price. In fact, the economic reasoning that
binds the price to scarcity holds true, even if the cause of
scarcity is not regarded. If the price is increased, the production
is cut (Governor, 2014). If the lawmakers put a cap on the
carbon emissions from the combustion of fossil fuels it can lead
to increased prices. There is a contrast between high prices that
are as a result of carbon cap and high prices that are caused as a
result of different other forces. On one hand, the high prices
that arise from a carbon cap are normally a burden to the
consumers and it will not affect the general economy. They are
transferred from the general economy to the consumers.
The extra costs that the consumers are paying normally go to
the holders of carbon permits. It is clear that unlike price
increasing as a result of market forces, the price increasing as a
result of carbon cap is known to recycle the dollar not only in
the state of Ohio but in the whole of the US. When these

happen, there are three agencies which benefit;
· These are benefits to corporations especially if the permits are
given to corporations without any pay.
· Most firms which are energy dealers and their shareholders
will also get to benefit
· It can also be a benefit to the government since the permits
will be auctioned and not just given away and the value of the
permits will be offered back to the government as profits
(Governor, 2014). On the other hand, the money can also
benefit the general public, but it will depend on what the money
is used for public expenditure or even cutting taxes and thus,
the person who is going to benefit from this money will largely
depend on his relationship with the tax in place and what the
cash is used for and how.
There is a great possibility that the consumers will be either
partially or even fully insulated from the impact of high prices
especially if the revenue from permit auction is given back to
the public as equal per capita dividends (Laufer, 2012). The
household that have small carbon footprints will have more
dividends than they are paying higher prices. This is a policy
that is called a cap- and – dividend policy. It is approximated
that in the next forty or so years in the future, the value of
permits under a cap will amount to trillions of dollars, then its
mechanics (mechanics of cap-and-dividend A carbon cap) will
be administered upstream without any challenges and with the

need of permits which are supposed to bought by the first
sellers of fossil fuels into the state economy.
The cap is meant to reduce the supply and raise prices of fuels,
and the result is that the market signals will spur and household
and families will start investing in clean energy. In most cases,
the cap- and- dividend policy, the permits are auctioned by the
state government and almost all the revenue from the permits is
given back to the public in terms of equal payment per person.
It’s name according to the economists is a `feebate’
arrangement, which means that individual persons pay fees that
is based on their use of a scarce resource that is owned in
common and as a community then the fees is rebated in equal
measure to all the co-owners. The fee is set by the carbon
footprint of the household and the owners in partnership are all
the people of the state.
Dividends can be disbursed through ATM cards such as those
used in almost all the states to get access to Social Security
funds. When they go to the ATM persons are able to check the
auction revenue that was deposited in their accounts and they
can also withdraw cash when they like. In Ohio State, auctions
can be held monthly or even quarterly when the number of
permits that are to be auctioned being reduced slowly as the
carbon cap becomes tight over time (Agriculture, et al., 2014).
This can help the holders to bring fixed quantities of fossil
carbon into the economy of the state in a given time such two

years from the real date that purchases are made. The firms will
only be able to buy the permits that can be auctioned, bearing in
mind that permits cannot be traded. There is no permit in fact
which can be sold, ranging from driving permits, gin permits,
landfill and disposal permits and even parking permits cannot
be bought or sold in markets, since they have legal concerns
which and names which cannot be transferred in any manner to
another person.
There is a big need for firms to be balanced when it comes to
receiving permits. Since all of the permits are given free of
charge, their needs is based on a given formula such as historic
emissions so that no firm gets more than they need nor there can
be another that will have less than they need. Thus, trading is
very essential to redistribute them from one holder to another. If
for instance 100 % of carbon permits are auctioned then permit
trading will not be needed.
Trader profits have not been known to drive a wedge between
the amount paid by consumers in higher prices and the amount
of available revenue that can permit sales. There is no carbon
revenue that can be siphoned off by speculators or trading
firms. There are times also when non-tradable permits can
safeguard the policy from the perception or the reality of market
manipulation by the stakeholders who are seeking to take part in
the system. Dividends against other uses of carbon revenue
other than returning 100 % of carbon revenues to the public, the

policy makers could allocate some revenue to some other uses
within the state such as investing on clean energy, offsetting the
impacts of higher fossil fuel prices on the purchasing power of
the state. The transitional adjustment aid to workers,
communities or even firms that are adversely affected by the
transition away from the fossil fuels as well as other
government expenditure, the tax cuts or the reduction of deficit
and therefore, a step should be taken to ensure that all is in
place.Permits versus Taxes
Tax is the only alternative way of putting a price on carbon. In
this sense, carbon tax can be defined as a permit with a fixed
price (Bartholomew, 2015). The cap – and- permit policy sets
the amount of permits that need to be emitted and allows a
determination of the permit price. In carbon taxes, higher prices
offer a market signal that encourages energy efficiency as well
as investment in alternative energy. Therefore, the policymakers
have a responsibility to oversee the future demands of fossil
fuels bearing in mind that there will be new technologies that
will be available and if the economy will zoom towards any
direction, thy will be able to achieve results that are good. It is
upon the policymakers to determine if they want to set the
quantity of permits or to set the carbon price. However, it is not
easy to predict the future demand on energy since there are so
many uncertainties about the demand in the future. Thus, the

relationship existing between quantity and price will not be
predicted as well.
The ultimate and paramount aim of climate policy is to reduce
emissions so that not only the state of Ohio but all the states of
America should reach the 2050 target. A convincing case needs
to be made so that the right quantity is got and the right number
of permits is set so that their prices will be varying according to
their demand. It is also good to note that at times, politics may
be a major contributing factor to reduce the carbon tax to be too
low basing their decisions on the optimistic projections of the
resulting emission reductions (Marien, 2013). The politics can
also influence the undermining of the efficacy of a cap- and-
permit policy, happening in two major ways;
· In the first place, they can set the cap at a level that is
inadequate and which will not enable them to achieve the set
emission reductions
· Secondly, they can allow `offset’ where instead of curtailing
fossil fuels firms are given credits for other actions like
planting trees, slowing the rates of deforestation or even
reducing carbon emissions not only in their states but also in
other states and in the whole of the US (Kreiser, Andersen,
Olsen, Speck, & Milne, 2015).
Then, the permits case rather than taxes is premised on a very
tight cap which can reduce emissions so as to meet the 2050
target. In the case where policy makers choose to go by the

carbon tax, there will be a challenge of revenue
distribution.Potential uses of carbon pricing taxes in the state
levelTax cuts
One of the major areas where people suffer is in payment of
taxes. If the revenues from carbon pricing can be invested in
this sector, then it can fund cuts in other tax rates. The taxes on
labor as well as capital can reduce the income of persons and
businesses and will eventually decrease incentives to engage in
productive activities like in work and investment. All these
taxes are different from carbon tax that helps to correct market
failure and can also reduce the incentive to reduce emissions
that come from greenhouses. Returning money to households or
electricity consumers
Likewise, the revenue that is got from carbon pricing can be
returned to households and families through the lump sum
payments that is normally divided equally to the citizens. At
times, alternate metrics is used to divide the money but they
have to ensure that each household gets that sum. Because of
the fairness and the simplicity involved in the tax- and-
dividend approach, it has gained popularity and it is the most
common approach used in distribution of the revenue that is
taxed from carbon pricing. The households in the state are
either given the tax refunds or they are sent quarterly or annual

checks. At times, the approach ensures that low- income
households receive more income as they spend on tax.Deficit
reduction
The large national deficits are known to reduce the economic
rates by increasing interest rates and inhibiting the private
sector investments. This will then increase the future tax
burdens to make pay offs especially on the principal or even on
the interest on the debt. With the revenue from carbon pricing,
the annual deficit can be reduced and the diverse economic
effects caused by the large deficit rates could be brought under
control.Investment in combating climate change
The revenue from carbon pricing can help in stimulating the
innovation in low- carbon technologies such as renewable
energy that is becoming very common in other states and even
in the whole nation. In addition, carbon pricing can offer
revenue that can be helped in promoting the development and
development, deployment and the deployment of breakthrough
technologies that will see to the fact that the climate is well
conserved and managed (Davis, 2014). There is also a need to
invest in infrastructure that can help communities adapt to the
effects of climate change that are now unavoidable such as
extreme weather in terms of scorching sun, waves and sea level
rise.Transitional assistance

There are some persons in the state that are mostly affected by
the carbon price. For instance, there can be job training in the
industries where there are anticipations of losing jobs such as
coal mining industries. There are also some households,
businesses and regions of the state that are entirely dependent
on production and consumption of fossil fuels in order to
smooth the transition to a lowed carbon economy. These
revenues can also be utilized to offer assistance to industries
that face an increased competition from foreign
competitors.Carbon Pricing Design Features
An establishment of carbon pricing program needs a number of
decisions on the policy structure as well as the design. The
following can be used as the basis of decision making regarding
carbon pricing. It is good to note that each of the elements is
relevant to both sides of carbon and tax as well as a cap- and-
trade program;Scope
This refers to the portion of overall greenhouse gas emissions
that are covered by a program. In order to make a decision on
the scope, there is a need the policy makers to decide on;
· Whether the program is going to only cover CO2 emissions or
whether it will also cover other greenhouse gases
· The economic sector that the program is going to cover

· If all the emitters are only the ones that are above a certain
threshold of emissions are regulated or if they are basically not
regulated.
In most cases, if the scope is broad, then there is great
expectation that the reduction of emissions will also be great
from a given carbon price. In addition, a broad scope means that
a certain quantity of emissions reduction will be achieved at a
reduced cost.Point of regulation
There are different points of the economy that carbon pricing
can be applicable. In an upstream approach, the carbon price
can be applicable when the materials that will lead to emissions
first enter the economy, such as at coal mines, at the oil and gas
drilling sites or at the entry points of fuel imports. This
approach is known to allow a big fraction of energy carbon di
Oxide emissions that should be covered while at the same time
regulating few entities (Bartholomew, 2015). On the other hand,
a downstream approach will be applicable to the carbon price
at the exact points where the emissions occur. This can then be
applied at power plants as well as at manufacturing areas. At
times it is hard to have it applied to personal buildings, cars and
even trucks. Even so, an integrated approach can be used which
is a mixture of both the upstream and downstream approaches.
Examples where an integrated approach can be used is in oil
refineries and well as in natural gas processing plants.Reporting

and verification
An established emissions reporting and verification system will
be a very good way to carbon pricing decision making.
Although reliable reporting systems are in place in many areas,
it should be noted that the addition of carbon price creates
direct economic effects for both of the recovered areas and this
may be known to reduce the tax burden. There are many given
ways in which verification can be mad possible, ranging from
independent third party verification to self- certification that
has very strong penalties.Setting the price or cap
Carbon tax and cap- and- trade programs need that there is
setting of prices and emission caps. By setting the tax level or
the cap level needs that there is a balance from many
considerations including from the political, economic,
environmental and even legal grounds. In the climate change
perspective, it is right to begin from any of the considerations
that are targeting emissions from the estimation of the arrears
caused by GHG emissions. On the other hand, the non- climate
policy priorities such as tax reforms, there may be a given
amount of revenue that is needed in order to set the price. Thus,
it can be easy to increase the stringency of a given program
slowly over a given period of time to adjust the price or the cap
in case conditions change. The many other factors that are to be

considered include allowing offsets such as the emissions from
entities that are indirectly, by the policy. For instance, the
enhanced carbon sinks that are achieved by tree planting can
help in reducing the costs of a policy, but it can also make it
hard to have emissions reduction. Lastly, the policy makers are
supposed to look at the broad policy context where carbon
pricing is introduced that includes a complimentary policy that
may be required to reduce the emissions even further (Marien,
2013).
It is also important to note that the price or a cap is not going to
be a single number, but it is supposed to be a trajectory which
means that it will have an increasing tax rate or even a
declining cap over a period of years or decades. Thus, as much
as all the factors are to be taken into consideration, they should
show a given balance in terms of politics and economy so as to
try and ease economic transition aiming to start a low price and
allowing the price to go up over a given time so that emissions
can be reduced. Together with the rest of the States in the US,
Ohio State has set a 2020 target in which it aims to completely
offset the carbon emissions. If these rates are achieved by this
time, then they can be the basis of trajectory of emissions caps
and modeling can be made possible especially in the estimation
of the resulting carbon price or even to offer a suggestion of a
perfect carbon tax trajectory. On the other end, the long-term
targets such as that of 2030 and that of 2050 can be brought

under use as well.
At times, it becomes hard to look at these matters into the
future, especially making the targets work. For instance,
translating between carbon prices and emission levels on a long
term period is not really practical. Whether the determination of
the effects and consequences of the emissions over time of a
given tax system or even the prices that will be as a result of a
carbon cap is hard to predict due to a number of future
uncertainties that are involved in trying to model long- term
developments in the economic energy systems. In reality,
setting a carbon price based on damages that are brought about
by climate changes are aiming at ensuring that the full costs of
climate change are included into the prices of carbon intensive
products and goods and even the services that are related to
carbon.
Looking at the federal government of the US, they have made
estimation to the `social cost of carbon’ so that they can gain
insight into a key economic question and what damages are
created by increased carbon missions. Many countries within
Europe and outside have also followed suit so that they can take
collaborated efforts in reducing the carbon emissions. This is
majorly driven by the fact that when the effects are suffered, it
is not Europe alone that will suffer but it is the whole world.
For instance, if the ozone layer is affected such that it undergo
extreme thinning, all the countries and in fact the world will be

affected. Thus, the attempts of SCC are to possibly identify and
quantify the impacts that climate change could bring for
centuries in the future (Bruins & Heberling, 2013). The impacts
are known to have negative effects on public health,
infrastructure and even the environment. In addition the impacts
should be translated into monetary terms and it is not counted
on the present value so as to evaluate the cost of increasing
emissions in the present value of cash. In the national
government, the Office of Management and Budget has given
direction to the agencies involved to make use of SCC estimates
in knowing the quantity and the intensity of the benefits of
reducing carbon emissions as part of their regulatory
consequence analysis.
In most cases, the resulting estimates of SCC are very wide
because of the main risks surrounding the impact of estimates
and owing to the fact that the estimates are only approximations
and they cannot be relied as the actual figures. This is also
supported by the fact that there is no enough information that is
needed to translate given arrears into monetary values
(Governor, 2014). For the decision makers and policy makers
that are motivated by the need to look at climate change
available for given policy purposes like the payments to be
made on reductions in payroll or the corporate tax rates or even
provision of funds for infrastructure offers an alternate
approach used to determine the level of carbon price. Modeling

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