Among the scientific community, climate change is almost universally accepted as a factual phenomenon which is attributable to human activity. However, the consensus is far from universal concerning how to address it. Strategies like the Carbon Reduction Commitment Energy Scheme, commonly known as the UK Carbon Tax, have been widely criticized because of their supposed adverse effects on commercial electricity rates, which would in turn make UK commercial enterprises less competitive in comparison with those located in countries without a carbon tax. Other critics argue that the UK Carbon Tax has been ineffective in its stated goal of reducing carbon emissions.

The Carbon Reduction Commitment Energy Scheme

The Carbon Reduction Commitment Energy Scheme went into effect in 2011, imposing a mandatory maximum on carbon emissions on large non-energy intensive operations, both public and private. Businesses affected by the scheme include banks, hotel chains, supermarkets, and government entities that exceed 6,000 MWH in half-hourly metered electricity consumption each year. Organizations such as hospitals would be exempt from the scheme. The scheme is designed to reduce carbon emissions by businesses in the UK by 1.2 million tons by 2020. Businesses that exceed their allotted carbon emission maximum levels will be required to pay a tax as a penalty. Under the original plan, commercial enterprises that cut their carbon emissions by the largest margin would receive cash benefits under the scheme from revenue raised by penalties; however, the scheme was later revised so that revenue raised by penalties would go to the government.

Criticism of the Carbon Tax

Especially since the change in the scheme that diverts fund raised by penalties from companies that reduced their carbon emissions to the government, there has been heavy criticism that the UK Carbon tax represents a stealth green tax on businesses. Other critics claim that the added tax will effectively raise commercial electricity rates, forcing UK commercial concerns to raise the prices charged to their customers, making them less competitive in comparison with businesses located outside the UK.

Another area of criticism has been led by climate skeptics who claim that the UK Carbon Tax won’t even accomplish its stated goal of reducing carbon emissions. Some climate change skeptics even argue against the fact that climate change is occurring at all. Others claim that any change in the climate is part of a natural cycle which has nothing to do with human activity. Both arguments claim that the UK Carbon Tax is both unnecessary and ineffective, and therefore should be eliminated.

Yet another problem with the tax lies in its implementation, according to a story published in 2012 by BBC News. According to the story, the problem lies in the fact that power suppliers are also covered by regulations concerning their carbon output. The story explains that if companies served by the power companies reduce their carbon output, the power companies are then free to transfer their permits to another company that produces larger carbon emissions, resulting in no net reduction in carbon emissions.

Carbon Tax Versus Cap and Trade

Carbon taxes such as the UK Carbon Tax represent a "stick" approach to reducing carbon emissions. The principle behind such "stick" regulations is that companies are not driven by altruistic concerns, but primarily, if not exclusively, by their bottom line. By adversely affecting their bottom line with penalties, companies receive an incentive to act in ways that are beneficial to larger society.

An alternate market-based approach to reducing carbon emissions uses more of a "carrot" or positive incentive approach. Schemes such as cap and trade fall into this category. Under cap and trade, companies are awarded with a certain number of carbon credits, with a total number of credits set to reduce the total carbon output produced in a given location such as an individual country like the United States or an international region such as the European Union. If a company produces exactly the same amount of carbon emissions as they are allowed by their credits, they need not take any action. However, companies that produce more carbon emissions than allowed by their credits would need to either obtain more credits or pay a penalty. One way of obtaining more credits would be by purchasing them from companies that produce fewer carbon emissions, which would then profit from increased revenue.