Argument 01

Opportunity Cost:
Financial resources could be allocated to alternative strategies
E.g. Investing in renewable energy infrastructure / Improving energy efficiency in buildings/
Promote sustainable transportation system / education
Evidence:
 Purpose for firms: Making profits (maximized)
 Subsidy: carbon regulations still have adverse effects on profits
 Example of alternative strategy
Denmark: policy (provided financial incentives for biomass power generation)
Biomass is a kind of natural resources

Japan: invested in renewable energy infrastructure to reduce its reliance on fossil fuels
$16.8 billion in renewable energy projects e.g. solar and wind power
Implemented building energy codes and standards + energy conservation programs
Sets energy efficiency targets for different types of buildings
Reference:
Li,B., Geng, Y., Xia, X., & Qiao, D. (2021). The Impact of Government Subsidies on the Low-
Carbon Supply Chain Based on Carbon Emission Reduction Level, 18, 2.
https:// doi.org/10.3390/ijerph18147603

Refute:
Cost-effectiveness and efficiency: compared to other polices
Argue the mkt.-based approach e.g. carbon tax can provide stronger economic signals and incentive

Evidence:
Situation: firms are at higher emission levels and strive to reduce more emissions more likely that the
additional cost of emissions reduction will increase
Because originally: firms choose the easiest & cost-effective methods
Continue to reduce: remaining options for further reduction become limited and more
expensive
 Analysis for the LTMS (Winkler, 2007; Hughes et al., 2007; Winkler, 2007),
a carbon tax was shown to be very effective in reducing GHG emissions, and was the largest
emission reductions of all options analyzed
= emitters get to decide how much they reduce emissions.
reduce emissions until it reaches a point where it is more expensive to additionally reduce emissions
than to pay the tax (its marginal abatement costs = tax) as more efficient for them to pay tax rather than
incur higher cost of reducing emissions

= similar to cap-and-trade
 Cap-and-trade system have been proven to be a cost-effective measure in controlling control air
pollution

Reference:
Winkler & Marquard, (2011). Analysis of the Economic Implications of a carbon tax. Journal of Energy in
Southern Africa, 22(1), 55-68
http://www.scielo.org.za/scielo.php?script=sci_arttext&pid=S1021-447X2011000100006&lng=en&nrm=iso

Wood, J. (2018). The Pros and Cons of Carbon Tax and Cap-and-trade Systems. The School of Public Policy Publications

11(30), 4.