Nowadays the world temperature has been increasing drastically over the last ten years. This primarily due to various reasons for example CO2 emissions from increasing number of cars, burning fossil fuel, emissions from industries etc. As a result, global warming and melt down of the North Pole ice thickness leading to flooding in some parts of the world as well as earthquake and most of the natural disasters that occurred recently. This topic has been a hot debate recently and they form some organizations to deal with this issue such as UNFCCC (United Nations Framework Convention on Climate Change) set up Kyoto Protocol in which most of the countries have to sign a contract in order to reduce the amount of CO2 emission and they have their climate change meeting every years in order to follow up their plan. In each country such as Thailand, they try to do it in their own way depend on the government policy. Sometimes it’s also depended on political in that country as well since various interests will be affected by each policy.

One of the main tools that government in Thailand uses for reducing carbon emission is carbon tax. Carbon tax or Pigouvian tax in Economics theory is a pollution tax that its goal is to reduce level greenhouse gases including Carbon Dioxide to the socially optimal level in that industry. The more carbon you produce the more tax you pay. All the sectors or industries that include the emissions of greenhouse gases eapecially transportation sectors in Thailand will be affected by this policy. Moreover, Thailand’s policy maker set a limit that firm can produce at this level first after that they follow by a carbon tax.  Therefore, firm will produce where their marginal benefit cost equal to the amount of tax. From this policy maker can control the emission level by using a tax as a guideline. For the cost effectiveness of this policy I believe that by putting a carbon tax it is the cost minimizing tool for government of Thailand. By comparing with permit and trading system, carbon tax is more simple and easy for government to implement. Furthermore, assuming that government can spend their tax revenue to public infrastructure such as dam, road, etc. In contrast with cap and trade policy, this may create a channel for firm to lobby government in order for them to trade and gain the permit from trading market and enjoy the profit from rent seeking activity (Gordon Tullock, 1967) by gaining the existing resource of the economy through political activities without creating a new resource. Also, carbon tax will generate more cost to the firm, which is the cost of paying tax and abatement cost. Hence, firm will have more incentive to invest in the new technology in order to lower their abatement cost in the future. In the future, tax policy can be implemented overtime by adjusting the rate of the tax equal to the marginal abatement of the firm and the tax revenue can sustain this policy in the long run.

The incidence of this policy seems to target on all the firms that produce greenhouse gases in which all the cost incur to them. However, I believe that once the policy has been implemented, the burden of this policy will fall to consumer instead of producer. The reason for this is because fuel and energy are limited resources in the economy and Thailand is known for one of the most traffic congestion country since almost every household has a car. As a result, it will create an inelastic demand to customer. Hence, no matter the price of these product, consumer will still buying its. From this, firm will take the opportunity to pass all their cost to consumer. For example, if the cost of their abatement and tax cost are very high from the incidence of the policy, they will raise the price of the products to cover their own cost and customers are the one who end up paying a tax. This policy clearly view as a regressive policy since it impacts the poor more. Imagine if the income of the poor is going up, most of their incomes need to spend on these products because of the inelastic of demand. I believe that the impact will fall to the entire customer in general but not on a specific group in the society. The revenue that government will get on this policy totally depends on how you assume that government will use it for public interest or their own interest. According to Leviathan theory (Thomas Hobbes, 1651), government will take all of the revenue to them but other can view government as a good party in the society and spend their revenue on public goods and income distribution. Based on the history of government in Thailand and the literature review I have been reading on, some of the revenue have been distributed as a corruption which means income distribution hasn’t been improved that much.

All in all, carbon tax can reduce the amount of carbon emission level to society optimal point. The challenge that I personally have on carbon tax is how government can find where the optimal level is? I think it is pretty hard for government to measure pollution in the society. Also, even you reduce its, it is still in the society. It is impossible that we can reduce until its equal to zero. This is the challenging part of the policy maker. How you can balance each goal in society? How you can comfort each party in the society since each policy has its own trade off.