Commandand Control

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Command - and - control measures seek to influence a market by imposing regulations and taxes aimed at equalizing the negative externalities attributed to the production or trade of a specific product or service. This concept is widely adopted in regulating pollutants such as ozone depleting substances (ODS) and holds promise for achieving reductions of fossil fuel consumption through carbon tax or emissions regulation of high GWP gases such as hydrofluorocarbons (HFCs) or SF6.

Carbon Tax Carbon tax is a form of indirect tax used as a price instrument to regulate greenhouse gas emissions resulting primarily from the combustion of fossil fuels. The release of CO2 into the atmosphere is considered as a negative externality of a product or service that enters the economy where the producer or distributor is not required to pay the marginal cost of damage to the environment. English economist, Arthur Pigou, first proposed the concept of taxing goods that

12) Own action is a term used to describe a company undertaking its own initiatives to reduce emissions from their own installations or operations.

are the source of negative externalities in 1912 in order to accurately reflect the true cost of production to society [10].

While a carbon tax is an effective instrument for achieving a shift in consumption patterns, there is concern that as a stand-alone measure, it is not sufficient to drive innovation beyond the compliance obligation. For large industrial sectors that fall under a carbon tax, the danger is that industry will pass-through the cost of carbon to consumers in circumstances where end products such as ammonia, experience limited exposure to international markets. It then becomes a tremendous burden on the regulating authority to redistribute revenue to lessen the impacts on the economy. Particularly for multinational companies, taxation does not deliver flexibility to maximize global assets and minimize the cost of carbon compliance - 11]- However, taxation is an effective instrument to equalize negative externalities and promote conservation in sectors such as transportation where it is difficult to monitor the end use of fossil fuel consumption.

Regulations This form of command- and- control measure has been particularly effective for managing ODS under the United Nations Montreal Protocol on substances that deplete the ozone layer. This internationally binding treaty is designed to protect the ozone layer by phasing out the production of a number of ODS [12] .

A governing authority to reduce or phase out specific emissions or activities linked to emissions, establishes regulations to manage GHGs. Discussions around the introduction of regulations to manage emissions generally target high GWP gases such HFCs, perfluorocarbons (PFCs), SF6- and N2O. This is an effective instrument to reduce high GWP gases where a low MAC is available; however, it is difficult to apply the regulation corresponding to a particular gas. For instance, an adipic and nitric acid production facility both produce N2O as a by-product from the production process but have significantly different abatement solutions resulting in a large discrepancy in the MAC.

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