Emissions trading is an economic workaround, a fudge if you will, to reducing one’s pollution levels by buying off the emissions credits of others who are polluting less.
Emissions trading (also known as cap and trade) is a market-based approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants.
The conventional approach as first suggested back in the 1960s is that a regulator sets a cap on the level of pollution allowed. Companies then buy permits representing their allowable emissions of any given pollutant. Critically, the total amount of pollution covered by the permits cannot exceed the cap, which supposedly then limits the total emissions across an industry. Companies who anticipate exceeding their permits can then purchase credits from other companies who are not exceeding theirs with an added option that credits might also be obtained by offsetting emissions against work done elsewhere to reduce the emissions released by others.
It always sounded like papering over the cracks or sweeping the dust under the carpet to me. It was always going to show up sooner or later. Nevertheless, it was first suggested as a real alternative to industry actually cleaning up its act in 1990 for sulfur dioxide emissions and was first implemented for this noxious gas, which causes all kinds of environmental and ecological problems, not least acid rain, as it belched into the atmosphere from power stations burning fossil fuels.
The economic success of the SO2 trade led the Clinton Administration to ensure that trading in carbon (carbon dioxide, CO2, specifically) was embedded in the Kyoto Protocol for supposedly reducing global greenhouse gas emissions.
Of course, balancing the emissions books, is like any other economic nonsense an entirely black art with a whole industry, akin to merchant banking and futures trading, debt managers, emerging in recent years as intermediaries became essential players in the papering of cracks and the sweeping of dust. We all know just how well such intermediaries as Fanny and Freddy and others can play their games and ruin economies and lives while all the while feathering their own nests with fat cat bonuses, to mix yet more metaphors.
Indeed, the USA apparently took the attitude under Clinton that they had found an effective tool for “controlling” emissions that could work on a global scale and preclude any industry from actually solving the problem of pollution. It fascinated me that the USA somehow thought it morally and ethically credible to buy up the emissions credits of the former Soviet Union on the basis that after the collapse of communism industry there had almost ground to a halt for many years and so emissions were well below what they would otherwise have been…
Some observers claim that emissions trading has had an impact on pollution and greenhouse gas output. It seems unlikely. Indeed, economist Carolyn Currie of Public Private Sector Partnerships, in Sydney, Australia, in discussing the enormous but all-but ignored impact of agriculture on climate, points out that the “total failure to consider the side effects of a cap and trade system with permits – that is that derivatives and insurance that would grow out of the system – could generate a second global financial crisis as trades on trades generate 40 times the original primary transaction.” But with those kinds of profit margins to lust after, can we expect the money people not to push for emissions trading to grow?
Currie points out that despite years of evidence accruing regarding the impact of intensive agricultural practices on soil erosion, desertification, carbon emissions and water loss, it was only in 2009 that farmers were at long last added to the equation. But even then it seems that only fossil fuel usage rather than these other factors was considered. In a paper published recently in Interdisciplinary Environmental Review, Currie puts forward a proposal that could help Australia rescue its water and land resources as well as reduce carbon emissions that doesn’t involve profit-rich trading schemes. The very same proposal might equally be adapted to other regions where agriculture inevitably represents a much bigger share of emissions problems than is usually recognised. It really is time to stop papering and sweeping and dig into the underlying problems of climate change.
Currie, C. (2010). The biggest hole in Australia’s version of the solution to climate change – what is wrong with its carbon reduction trading scheme Interdisciplinary Environmental Review, 11 (1) DOI: 10.1504/IER.2010.034604