Climate Change Economics and Policy Essay Example

Climate Change Economics and Policy


Environmental changes encourage formulation and implementation of different policies and frameworks. Some of the common policies are the Carbon Tax and Direct Action. The aim of the essay is to discuss motivating factors towards embracement of these policies. In addition, the paper compares and contrasts the policies, discusses the best policy and proposes modalities in formulating responsive policy.

The Main Motivation of Implementing these Policies

A greenhouse gas emission is any compound in the atmosphere with the capacity of absorbing infrared radiation, which translates in holding and trapping heat in the atmosphere (Elliott and Fullerton 2014). The consequence of the entire process is climate change leading to global warming. Global warming is a major problem because it affects humanity and different ecosystems (Subramaniam et al. 2015). For example, the emergence of new diseases and crop failures are directly linked to emissions resulting in global warming. The climatic changes have forced institutions to formulate and implement measures to counter the emissions to reduce the negative impact on the environment (Bordigoni, Hita and Le Blanc, 2012). These measures come in forms of policies such as Carbon Tax and Direct Action that provides guidelines and strategies to be implemented translating in the reduction of emissions. Without these policies, the current situation would deteriorate because of the emergence of more industries and globalization of business (McGuirk, Dowling and Bulkeley, 2014). The increased moved of people due to tourism, people preferences to materialism, and dynamism within different sectors means that means should be in place to counter emissions. Hence, the climate change and global warming motivated the implementation of these policies.

Comparing and Contrasting Policies: Carbon Tax vs. Direct Action

Carbon Tax is a tax on fossil fuels that are used by vehicles and industries with the aim of reducing the emissions of carbon dioxide. The more an organization or industry emits carbon related byproducts, the higher amounts the organization or industry pays (Kriegler et al. 2013). In addition, Direct Action is a program that aims to sponsor programs towards encouraging renewable energy usage while also companies appreciating on processes to reduce emissions (Parliament of Australia n.d). These policies are similar in that the Direct Action motivates companies through funding to implement programs that reduce emissions while the Carbon Tax is aimed at ensuring companies implements measures contributing to the reduction of emissions (Parliament of Australia n.d). Even though the policies take different approaches, the aim of these policies is reducing emissions.

The aim of the policies is to reduce emissions, but the difference is the approach it takes. The carbon tax targets the companies and industries with specific allocations or limits meaning passing the limits translate to penalties. Moreover, the companies that implement appropriate policies benefits through reducing the overall costs of production (Beck et al., 2015). For example, the companies using more of fossil fuel are forced to purchase carbon credits to mitigate the costs. Conversely, Direct Action is an Australian government initiative aimed at funding organizations and companies aiming to integrate sustainability measures. It means the government motivates companies through funding to embrace measures to reduce emissions.

Appropriate Policy: “Best.”

An effective policy should be self-sustaining and considers the requirements of numerous stakeholders (Marron and Toder, 2014). The policy should reflect the happenings within the sector and implement measures to continuously improve the processes. The ‘best’ between the policies is the Carbon Tax. The weakness of the Direct Action is the government by extension the public funds the processes, which sometimes is not possible to sustain (Goulder and Mathai, 2000). The Carbon Tax approach forces companies to meet the reduction objectives and not meeting the allocation means that the company would be penalized. The penalization can motivate the companies and industries to implement strategies to reduce emissions, which is different from the approach that Direct Action takes (Parliament of Australia n.d). Moreover, the Direct Action takes a completely different approach in that the companies are not motivated to implement any measures to reduce emissions until the government funds the activities (Burke et al. 2016). An effective process should encourage creativity and innovation in reducing emissions, and the Carbon Tax is the effective framework to achieve these objectives and requirements. Hence, the appropriate long-term strategy is focused on improving the Carbon Tax rather than focusing on the Direct Action policy.

Alternative Policy

Carbon Tax and Direct Action are important programs that can address the reduction of emissions but an alternative approach that collaborate the strengths of these policies can be implemented (Meng, Siriwardana, and McNeill, 2013). The alternative approach should employ the approach of Carbon Tax where the companies and industries fund the program rather than the Direct Action. The companies and industries would be motivated to implement measures and frameworks that result in sustainability (Bailey et al. 2012). Furthermore, companies that implement effective policies towards reducing emissions can be given benefits such as tax breaks while ‘rewards’ can be included depending on the nature of the industry or company (Crowley 2013). It means a collaborative and engagement framework should be encouraged ensuring the different stakeholders embrace any framework translating to a reduction of emissions (Ploeg and Withagen 2014). The alternative policy has to understand the dynamism of the sector meaning the policy should be responsive in nature and provide avenues of integrating other variables in the future. Therefore, a responsive and transformative policy is crucial in ensuring emissions are reduced.


In conclusion, global warming and climate change continue to negate the social and economic development including the negative impact to the environment. Different policies such as the Direct Action and Carbon Tax have been formulated and implemented with different successes, but an alternative approach should suffice. It is advisable a framework that incorporates the strengths of the policies are integrated while the support of different stakeholders should be incorporated in creating a responsive and transformative framework. The premise of the policies is to encourage creativity and innovation whereby the companies and industries implement measures and frameworks supporting the sustainability of the environment and reduction of emissions.


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