Carbon Trading Essay ⋆ Environment Essay Examples ⋆ EssayEmpire

This Carbon Trading Essay example is published for educational and informational purposes only. If you need a custom essay or research paper on this topic, please use our writing services. EssayEmpire.com offers reliable custom essay writing services that can help you to receive high grades and impress your professors with the quality of each essay or research paper you hand in.

Carbon trading describes an economic market trading scheme that will encourage a reduction in emissions of the climate-changing gases caused by anthropogenic activities such as the burning of fossil fuels for energy generation. Unlike a carbon tax, which is a rigid market-based instrument that simply increases the cost of emitting carbon dioxide (CO2), carbon trading allows a more flexible approach. The most common form of carbon trading occurs within a cap-and-trade environment. A government sets an overall cap on the level of emissions and issues emitters with allowances that can be bought and sold amongst members of the scheme. The scheme works by allowing a company that produces too many emissions to purchase allowances from an emitter that has produced less than their entitlement, thus ensuring the overall emission targets set by a government are met.

Trading in gases that pollute the atmosphere was first trialed in the United States under provisions in the Clean Air Act in 1990 (United States). Known as the Acid Rain Program, the U.S. government imposed a cap on sulphur dioxide (SO2) emissions from power plants, distributed allowances and the permission of the owners to meet targets by installing new technologies, burning fuels with a lower sulphur dioxide content, engaging in projects that reduced SO2 emissions from other parts of the economy, or through the trading of allowances between other participants in the scheme. Between the late 1980s and 2000, sulphur dioxide emissions from U.S. industry had been reduced by 5 million tons per year.

The success of the Acid Rain Program provided the United States with a strong argument that trading schemes could successfully reduce carbon emissions and should therefore be employed as a mechanism to reduce CO2 emissions under the terms of the Kyoto Protocol. Although the United States pulled out of the Kyoto Protocol in 2001, Articles 6 and 17 provide mechanisms that enable member nations to trade greenhouse gases. The Kyoto Protocol allows all greenhouse gases to be traded either directly through the transfer of allowances or through the Clean Development Mechanism. This mechanism primarily allows polluters in the developed world to earn credits for investing either in technologies that lower emissions in developing nations, or through investment in carbon sinks.

Big Players in Carbon Trading

The United Kingdom (UK) launched the world’s first economy-wide carbon trading scheme in March 2002 to help it meet emission targets set by the Kyoto Protocol. Over the first three years of the scheme, CO emissions were reduced by 5.9 million tons. The UK is now part of the European Union Emissions Trading Scheme, which was launched in January 2005. This is by far the world’s most ambitious trading scheme, and when fully operational, 12,700 industrial organizations will be able to trade carbon allowances.

Carbon trading also operates at a voluntary level, either directly through company endeavors or through programs such as the Chicago Climate Exchange. In 2000, Canada’s second-largest green-house gas emitter, TransAlta, released voluntary plans to reduce their emissions of CO2 to zero by 2024, primarily through carbon trading. The Chicago Climate Exchange is a pilot project that trades CO2 in a stock market-like environment. Companies trading on the exchange include Rolls-Royce, Ford, New Belgian Brewing Company, Dupont, Motorola, and IBM. Each company trading on the Chicago Climate Exchange has set voluntary targets to reduce emissions by 4 percent of their 1998 to 2000 average by 2006.

Critics argue that carbon trading will not significantly reduce climate gas emissions and will further reinforce social inequalities between the developed and developing world. Carbon trading does not encourage a significant change in polluting behavior by developed nations and excludes most poor countries because they produce very few emissions and thus have little to trade.

The European trading scheme, moreover, does not include emissions from transport or the aviation industry, which together account for 50 percent of their emissions. Russia has also been singled out as a potential problem. Kyoto Protocol targets were set to 1990 levels, and at that time Russia was still part of the Soviet Union and producing massive amounts of climate-changing emissions through energy production in decrepit, coal-fired power stations. Since the collapse of the Soviet Union, Russia now possesses significant carbon credits. Because many of the old coal-fired power stations have been decommissioned, there are fears that if Russia was to trade all of its credits, there could be a significant increase in CO2 emissions.

Trading via carbon sinks is also seen as problematic. Establishing a carbon sink-such as replanting areas of cleared tropical rainforest-would provide significant biodiversity benefits. There is no sound scientific method of determining precisely how much carbon is sequestered during the growing phase, however, or any political guarantee that the sink will remain in place for the life of the project it was designed to offset.

Bibliography:

J. Edmonds, et , International Emissions Trading and Global Climate Change, Impacts on the Cost of Greenhouse Gas Mitigation (Pew Centre on Global Climate Change, 1999);
F. Lecocq, State and Trends of the Carbon Market 2004 (Carbon Finance, World Bank, 2004);
N. McDowell, “Developing Countries to Gain from Carbon-Trading Fund,” Nature (v.4, 2002);
Petsonk, D. Dudek, and J. Goffman, Market Mechanisms and Global Climate Change (The Trans-Atlantic Dialogues on Market Mechanisms, 1998);
R. Rosenzweig, M. Varilek, and J. Janssen, The Emerging International Greenhouse Gas Market (Pew Centre on Global Climate Change, 2002).