US opts out of carbon trading
Selfish meanies - or foresighted economics?
Are market solutions, long touted as having a key role in combating global warming, on the way out? Or is news last week of the upcoming closure of the Chicago Climate Exchange (CCX) a sign that "cap and trade" is an idea whose time has passed?
At issue is the question of how to encourage companies to reduce carbon emissions, without heavy-handed micro-management from above. The problem lies in the fact that companies at present incur very little penalty, beyond the raw cost of the fuel itself, for profligate use of energy (and therefore, excessive output of CO2).
Governments can either introduce costs directly, through financial penalties for carbon emission, or indirectly, by introducing carbon emission permits and allowing companies to trade in these. This is known as "cap-and-trade".
The theory behind such systems is simple. Companies that participate are allotted so many permits by government, which dictate how much carbon they may emit. Those emitting carbon in excess of their allocation must either purchase additional permits from companies that are not making use of their permits – or face stiff financial penalties.
One of the earliest of these schemes, responsible in 2009 for 68 per cent of global carbon trades – which amounts to 6,326 million tonnes carbon dioxide equivalent (MtCO2e), according to World Bank figures) is the EU Emissions Trading Scheme (ETS). It was backed with early legislation by the EU, and currently covers more than 10,000 installations with a net heat excess of 20 megawatts in the energy and industrial sectors. These are collectively responsible for close to half of the EU's emissions of CO2 and 40 per cent of its total greenhouse gas emissions.
From 2012, the net will widen to bring even more companies into the scheme.
By contrast, the US initiative never had legislative backing. Rather, it was a voluntary scheme allowing companies to pledge to meet annual targets for the emissions of carbon from their factories and businesses. Those below the targets were then able to sell surplus allowances or bank them, while those above were able to purchase credits to offset their emissions.
However, with trades of just 50 MtCO2e in 2009 (down from 309 the year before) the CCX has never been a major player on the world stage.
Investors’ hopes were pinned on pledges given by President Obama that the United States would back a "cap-and-trade" system. The American Clean Energy and Security Act, also known as the Waxman-Markey Bill, after its authors, narrowly passed in the House of Representatives in June 2009.
It then stalled in the Senate, in July of this year, with the recent mid-term elections and Republican gains sealing its fate. "Cap-and-trade" is no longer on the US agenda.
In its place is a commitment to lower national emissions by 2020 – and a new CCX Offsets Registry Program. This will allow users to offset gasses, rather than trade credits: thus, if an executive took a lengthy flight, the CCX Registry would allow the company to purchase an offset for the gas emitted by the flight.
So is carbon trading in trouble? Almost certainly not. The EU ETS continues to go from strength to strength, with carbon trading today at €14.28 per ton, according to market analyst Point Carbon. Elsewhere in the world, interest in carbon trading is hotting up, with countries as diverse as China, Kenya and New Zealand all eager to get in on the act and set up their own schemes.
So does it matter? If you’re not convinced of the perils of global warming – or you are, but you don’t see carbon trading as being an effective way to combat it – then probably not. On the other hand, by opting out from globally accepted approaches, the US runs two risks: first, it will be seen, yet again, as putting its own selfish commercial interests before the common human interest. There could be a political price to pay for that perception.
Second, and perhaps more immediately worrying from a US point of view is that, right or wrong, Carbon Trading appears to be the way the world is going. By opting out now, the US effectively bars itself from one of the most lucrative markets of the future – as well as giving up its right to participate in discussions on the shape of economic solutions. That, in the long run, may be a far heavier price to pay. ®
Whatever the spin - CO2 is here to stay. Without it we would not remain here.
I am an (old) scientist - a real one - a scientist that challenges all assertions.
My conclusion is that all carbon/green taxes are an inconvenient con. Inconvenient to you and me, supported by the BBC.
Yes of course the European scheme is hotting up. Companies and individuals are making a killing trading these instruments, at our expense. China is very interested indeed, because we will be effectively paying them to close a factory, whilst they open up a new coal fired power station next door. Our industries are being priced out of the global market by all of this insanity. The US has got it right.
Crap and Trade - Carbon Trading is baldface lie!!!!!!!!!!!!!
So how many of you support becoming a 4th world economy so "developing nations" like China or India can grow more than they already have and more jobs are lost in YOUR country? Too late, your leaders ALREADY drank the Kool-Aid....
Carbon Credit trading is bull crap, plain and simple. It is built on the lies and prevarications of fools, politicians, trading houses and lawyers and is only meant to serve those in power and will do nothing to stem the tide of pollution or serve mankind.
The "developing nations" have NO Emission Regulations and are exempt from them under "Crap and Trade". Every heavy industry that used to be located in Europe or the US have moved to countries that don't require expensive emission control equipment. Instead of controlling source emissions, China has to close factories so the air pollution lessens during the Olympics. Mexico and other countries dump toxic heavy metals from plating and electronic manufacturing in their own water supply. And they do not care because life is cheap there.
What is the cost (in cash and in carbon units) of shipping the goods that used to be manufactured locally, from counties that are thousands of miles away now, back to the consuming countries that buy them?
What is the added cost of speculation in "Carbon Credits" to consumers?
How will this actually, physically reduce emissions EVERYWHERE?
The answers are; huge, even more costly and not at all.
The REAL solution is to require US/Canada style emission regulations in every country, require true recycling with established markets and pricing for recycled materials, equalize wages and cost of labor differences between countries by establishment of trade tariffs that prevent outsourcing manufacturing jobs and factories. Take away the incentive to move from developed to undeveloped countries and source control of pollution can be reestablished all the while returning employment to reasonable levels. Require that cities provide and incentivize the use of efficient public transportation systems. Bring back rail for longhaul travel and freight shipments and ban longhaul trucks and buses.
Combine the above with a rational Nuclear and Clean Coal power production policy, and we may be halfway there. Yes, there is such a thing as "Clean Coal" IF and ONLY IF the proper burner and emission control equipment is used. There are Nuclear Reactors that do not produce the huge amounts of radioactiuve waste that other types produce.
By the way, the re-creation of the infrastructure that is required to accomplish the above, also provides employment for the millions of unemployed and the underemployed.
Crap and Trade provides NONE of these benefits and will cost more in the long run.
Don't blame me when the lights go out on a reasonable lifestyle, blame your leaders.