How do we force firms to cut their carbon emissions?

Method One
For firms to label their products highlighting their carbon footprint in order to create the product.

Benefits
Shows consumers how carbon was used to make the product.

Can influence the consumers choice if carbon footprint is too high.

Ensures companies are regulating and aware of how much carbon they are using.

Can help lower emissions and companies will try to lower the carbon footprint in order to reduce costs.

Encourages firms to use local sources, as that will reduce their carbon footprint.

Method Two

Carbon Tax

This involves firms being charged so much per unit of carbon emissions that they produce.

Therefore having a direct impact on the cost of there product.

Benefits

Companies always know how much it is going to cost them.

Drives companies to use less emissions

Encourages them to use alternative methods

As the price of products increase it encourages consumers to use less. E.g. they will try to reduce there household gas and electricity usage

Disadvantages If the price of the tax is too high it will have a direct impact on a firms profits, jobs and consumers.

Company profits will reduce as people wont buy as much.

Jobs will be reduced as companies wont be making as much money to pay employees

Households won’t be able to use vital supplies such electricity, gas and heating.

If the tax is too low firms wont be bothered by the tax and will continue to burn too much carbon

Households will not care about the amount of emissions used.

Method 3

Cap-and-trade

This is when

To use emissions firms must have permits which will allow a each unit of emissions to be used.

They can obtain these permits either through an initial allocation or auction, or through trading with other firms.

Once brought into use firms are initially given free permits to start with this is know as “grandfathering”. This means that they only need to pay for extra permits initially as they are given free permits to cover the cost of normal business emissions.

This helps firms get used to new policy of controlling emissions.

Benefits

It is good in the short run for business as they do not have t pay straight away compared to the of Carbon Tax.

Puts a maximum on Carbon emissions and ensures it doesn’t go over.

Ensures firms budget and control the emissions use.

Money raised from auctions of permits will be