Wiki do sistema de negociação de emissões

Revisão para a fase 4 (2021-2030)
A Comissão Europeia apresentou em julho de 2015 uma proposta legislativa para rever o sistema de comércio de licenças de emissão da UE (EU ETS) para o período após 2020.
Este é o primeiro passo para cumprir o objectivo da UE de reduzir as emissões de gases com efeito de estufa em pelo menos 40% até 2030, em conformidade com o quadro da política climática e energética de 2030 e como parte da sua contribuição para o Acordo de Paris.
Aumentando o ritmo dos cortes de emissões.
Para atingir o objectivo de pelo menos 40% da UE, os sectores abrangidos pelo RCLE têm de reduzir as suas emissões em 43% em relação a 2005.
Para este efeito, o número total de licenças de emissão diminuirá a uma taxa anual de 2,2% a partir de 2021, em comparação com 1,74% atualmente.
Isso equivale a uma redução adicional de emissões nos setores abrangidos pelo RCLE de cerca de 556 milhões de toneladas ao longo da década - equivalente às emissões anuais do Reino Unido.
Melhores regras de fuga de carbono.
A proposta desenvolve ainda regras previsíveis, robustas e justas para lidar com o risco de vazamento de carbono.
Rever o sistema de atribuição gratuita para focar os sectores com maior risco de deslocalizar a sua produção para fora da UE - cerca de 50 sectores no total Um número considerável de licenças gratuitas para instalações novas e em crescimento Regras mais flexíveis para melhor alinhar a quantidade de licenças gratuitas com dados de produção Atualização dos benchmarks para refletir os avanços tecnológicos desde 2008.
Espera-se que cerca de 6,3 bilhões de licenças sejam alocadas gratuitamente às empresas no período 2021-2030.
Financiamento da inovação de baixo carbono e modernização do setor energético.
Vários mecanismos de apoio serão estabelecidos para ajudar a indústria e os setores de energia a enfrentar os desafios de inovação e investimento da transição para uma economia de baixo carbono.
Estes incluem dois novos fundos:
Fundo de Inovação - alargar o apoio existente à demonstração de tecnologias inovadoras para inovar a inovação na indústria. Fundo de Modernização - facilitar os investimentos na modernização do setor energético e dos sistemas energéticos em geral e aumentar a eficiência energética em 10 Estados-Membros de rendimento mais baixo.
Subsídios gratuitos continuarão a estar disponíveis para modernizar o setor de energia nesses países de baixa renda.
Entrada das partes interessadas.
As partes interessadas estiveram envolvidas em várias etapas no desenvolvimento desta proposta.
Consultas extensas foram realizadas em 2014, incluindo.
Na sequência destas consultas e da análise dos objetivos da política climática da UE para 2030, a Comissão realizou uma avaliação de impacto.
A proposta legislativa foi apresentada ao Parlamento Europeu, ao Conselho, ao Comité Económico e Social e ao Comité das Regiões, para ulterior análise de acordo com o processo legislativo ordinário.
O público teve a possibilidade de fornecer feedback sobre a proposta legislativa depois de esta ter sido adotada pela Comissão Europeia. O feedback foi recebido de 85 partes interessadas e foi apresentado um resumo ao Parlamento Europeu e ao Conselho.

Sistema de Comércio de Emissões da UE (EU ETS)
O Sistema de Comércio de Emissões da UE foi explicado.
O sistema de comércio de emissões da UE (EU ETS) é uma pedra angular da política da UE para combater as alterações climáticas e o seu instrumento fundamental para reduzir as emissões de gases com efeito de estufa de forma rentável. É o primeiro grande mercado de carbono do mundo e continua sendo o maior deles.
opera em 31 países (todos os 28 países da UE mais a Islândia, Liechtenstein e Noruega) limita as emissões de mais de 11.000 instalações que utilizam energia pesada (centrais elétricas e plantas industriais) e as companhias aéreas que operam entre esses países cobrem cerca de 45% das emissões de gases com efeito de estufa da UE emissões.
Para uma visão geral detalhada, consulte:
Um sistema 'cap and trade'.
O EU ETS trabalha no princípio do limite e comércio.
Um limite é definido na quantidade total de certos gases de efeito estufa que podem ser emitidos pelas instalações cobertas pelo sistema. O limite é reduzido ao longo do tempo para que as emissões totais caiam.
Dentro do limite, as empresas recebem ou compram licenças de emissão que podem negociar umas com as outras conforme necessário. Eles também podem comprar quantidades limitadas de créditos internacionais de projetos de redução de emissões em todo o mundo. O limite do número total de permissões disponíveis garante que elas tenham um valor.
Após cada ano, uma empresa deve entregar licenças suficientes para cobrir todas as suas emissões, caso contrário, multas pesadas são impostas. Se uma empresa reduz suas emissões, ela pode manter as licenças de reposição para cobrir suas necessidades futuras ou então vendê-las para outra empresa que não possui licenças.
O comércio traz flexibilidade que garante que as emissões sejam cortadas onde custa menos. Um preço robusto de carbono também promove investimentos em tecnologias limpas e de baixo carbono.
Principais características da fase 3 (2013-2020)
O EU ETS está agora em sua terceira fase - significativamente diferente das fases 1 e 2.
As principais mudanças são:
Aplica-se um único limite de emissões à escala da UE em vez do anterior sistema de limites nacionais O leilão é o método predefinido para atribuição de licenças (em vez de atribuição gratuita) e as regras de atribuição harmonizadas aplicam-se às licenças ainda gratuitas. os gases incluíram 300 milhões de licenças reservadas na New Entrants Reserve para financiar a implantação de tecnologias inovadoras de energia renovável e captura e armazenamento de carbono por meio do programa NER 300.
Setores e gases cobertos.
O sistema cobre os seguintes setores e gases com foco nas emissões que podem ser medidas, reportadas e verificadas com um alto nível de precisão:
dióxido de carbono (CO 2) da geração de energia e calor - setores intensivos em energia, incluindo refinarias de petróleo, siderúrgicas e produção de ferro, alumínio, metais, cimento, cal, vidro, cerâmica, polpa, papel, papelão, ácidos e produtos químicos orgânicos a granel Óxido nitroso (N 2 O) da aviação comercial a partir da produção de ácidos nítrico, adípico e glioxílico e de perfluorocarbonetos glioxálicos (PFC) a partir da produção de alumínio.
A participação no EU ETS é obrigatória para empresas nestes setores, mas.
em alguns setores, apenas plantas acima de um determinado tamanho são incluídas. Algumas pequenas instalações podem ser excluídas se os governos implementarem medidas fiscais ou outras medidas que reduzirão suas emissões em um valor equivalente no setor de aviação; até 2016, o EU ETS se aplica apenas a vôos entre aeroportos situados no Espaço Económico Europeu (EEE).
Entregando reduções de emissões.
O EU ETS provou que colocar um preço no carbono e comercializá-lo pode funcionar. As emissões das instalações do regime estão a diminuir como previsto - cerca de 5% em comparação com o início da fase 3 (2013) (ver dados de 2015).
Em 2020, as emissões dos setores abrangidos pelo sistema serão 21% menores do que em 2005.
Desenvolvendo o mercado de carbono.
Criado em 2005, o EU ETS é o primeiro e maior sistema internacional de comércio de emissões do mundo, respondendo por mais de três quartos do comércio internacional de carbono.
O EU ETS também está inspirando o desenvolvimento do comércio de emissões em outros países e regiões. A UE pretende ligar o EU ETS a outros sistemas compatíveis.
Legislação principal do EU ETS.
30/04/2014 - Versão consolidada da Directiva 2003/87 / CE do Parlamento Europeu e do Conselho, relativa à criação de um regime de comércio de licenças de emissão de gases com efeito de estufa na Comunidade e que altera a Directiva 96/61 / CE do Conselho 23/04/2009 - Diretiva 2009/29 / CE do Parlamento Europeu e do Conselho que altera a Diretiva 2003/87 / CE no sentido de melhorar e tornar extensivo o regime de comércio de licenças de emissão de gases com efeito de estufa da Comunidade 19/11/2008 - Diretiva 2008/101 / CE do o Parlamento Europeu e o Conselho que altera a Directiva 2003/87 / CE de modo a incluir as actividades da aviação no regime de comércio de licenças de emissão de gases com efeito de estufa na Comunidade 27/10/2004 - Directiva 2004/101 / CE do Parlamento Europeu e do Conselho o Conselho que altera a Directiva 2003/87 / CE, relativa à criação de um regime de comércio de licenças de emissão de gases com efeito de estufa na Comunidade, no âmbito dos mecanismos de projecto do Protocolo de Quioto 13/10/2003 - Directiva 2003/87 / CE do Parlamento Europeu e do Conselho ncil que estabelece um regime de comércio de licenças de emissão de gases com efeito de estufa na Comunidade e altera a Directiva 96/61 / CE do Conselho.
Relatórios do mercado de carbono.
23/11/2017 - COM (2017) 693 - Relatório sobre o funcionamento do mercado europeu do carbono 01/02/2017 - COM (2017) 48 - Relatório sobre o funcionamento do mercado europeu do carbono 18/11/2015 - COM ( 2015) 576 - Relatório sobre o funcionamento do mercado europeu do carbono 14/11/2012 - COM (2012) 652 - A situação do mercado europeu do carbono em 2012.
Revisão do EU ETS para a fase 3.
04/02/2011 - Conclusões do Conselho Europeu de 4 de fevereiro de 2011 (ver conclusões 23 e 24) 18/03/2010 - Orientações sobre a interpretação do anexo I da Diretiva RCLE-UE (excluindo atividades de aviação) 18/03/2010 - Orientação documento para identificação dos geradores de electricidade 06/04/2009 - Comunicado de imprensa do Conselho sobre a adopção do pacote clima-energia 12/12/2008 - Conclusões da Presidência do Conselho Europeu (11 e 12 de Dezembro de 2008) 12/12/2008 - Conselho Europeu Declaração sobre a utilização das receitas dos leilões 23/01/2008 - Proposta de Directiva do Parlamento Europeu e do Conselho que altera a Directiva 2003/87 / CE de modo a melhorar e alargar o sistema de comércio de licenças de emissão de gases com efeito de estufa da Comunidade 23 / 01/2008 - Documento de trabalho dos serviços da Comissão - Documento de acompanhamento da proposta de diretiva do Parlamento Europeu e do Conselho que altera a Diretiva 2003/87 / CE no sentido de melhorar e alargar o sistema de comércio de licenças de emissão de gases com efeito de estufa - Avaliação de impacto.
Implementação.
04/07/2013 - Projecto de Regulamento Alterado relativo à determinação dos direitos creditórios internacionais 05/06/2013 - Projecto de Regulamento sobre a determinação dos direitos creditórios internacionais 05/05/2013 Regulamento (UE) n. º 389/2013 da Comissão, de 2 de maio de 2013, que cria um Registo da União nos termos do à Diretiva 2003/87 / CE do Parlamento Europeu e do Conselho, Decisões n. º 280/2004 / CE e n. º 406/2009 / CE do Parlamento Europeu e do Conselho e que revoga os Regulamentos (UE) n. º 920/2010 da Comissão e N. ° 1193/2011 Texto relevante para efeitos do EEE 18/11/2011 - Regulamento da Comissão que estabelece um Registo da União para o período de comércio com início em 1 de janeiro de 2013 e os períodos de comércio subsequentes do regime de comércio de emissões da União nos termos da Diretiva 2003/87 / CE Parlamento Europeu e do Conselho e Decisão 280/2004 / CE do Parlamento Europeu e do Conselho e que altera os Regulamentos (CE) n. º 2216/2004 e (UE) n. º 920/2010 - ainda não publicados no Jornal Oficial 07 / 10/2010 - Regulamento da Comissão (UE) no 920/2010 relativa a um sistema de registos normalizado e protegido, em conformidade com a Directiva 2003/87 / CE do Parlamento Europeu e do Conselho e a Decisão no 280/2004 / CE do Parlamento Europeu e do Conselho - versão não incluindo as alterações introduzidas pelo Regulamento de 18 de novembro de 2011 08/10/2008 - Regulamento (CE) n. o 994/2008 da Comissão relativo a um sistema de registos normalizado e protegido, nos termos da Diretiva 2003/87 / CE do Parlamento Europeu e do Conselho e Decisão n. º 280/2004 / CE do Parlamento Europeu e do Conselho - versão aplicável até 31 de Dezembro de 2011 26/10/2007 - Decisão Misto do Comité Misto do EEE n. º 146/2007, que liga o RCLE-UE à Noruega, à Islândia e ao Liechtenstein 13/11 / 2006 - Decisão 2006/780 / CE da Comissão, relativa à redução da duplicação das emissões de gases com efeito de estufa no âmbito do regime comunitário de comércio de licenças de emissão no âmbito do Protocolo de Quioto, nos termos da Directiva 2003/87 / CE do Parlamento Europeu e do Conselho (n sob nº de documento C (2006) 5362) 21/12/2004 - Versão consolidada do Regulamento (CE) nº 2216/2004 da Comissão para um sistema de registos normalizado e protegido, com a redacção que lhe foi dada pelo Regulamento (CE) nº 916/2007 da Comissão, de 31 de Julho 2007, Regulamento (CE) n. o 994/2008 da Comissão, de 8 de outubro de 2008, e Regulamento (UE) n. o 920/2010 da Comissão, de 7 de outubro de 2010 - versão sem alterações introduzidas pelo Regulamento de 18 de novembro de 2011.
Aplicação do IVA.
História da Legislação da Directiva 2003/87 / CE.
Trabalhar antes da proposta da Comissão.
08/02/2000 - COM (2000) 87 - Livro Verde sobre comércio de emissões de gases com efeito de estufa na União Europeia Mandato e resultados do Grupo de Trabalho 1 da ECCP: Mecanismos flexíveis 04/09/2001 - Resumo Resumido do Presidente da reunião de consulta das partes interessadas (com a indústria ONG ambientais e ambientais 19/05/1999 - COM (1999) 230 - Preparação da aplicação do Protocolo de Quioto 03/06/1998 - COM (1998) 353 - Alterações climáticas - Rumo a uma estratégia pós-Quioto da UE Âmbito do RCLE UE : 07/2007 - Pequenas Instalações dentro do Sistema de Comércio de Emissões da UE 10/2006 - Inclusão de atividades e gases adicionais no Sistema de Comércio de Emissões da UE Maior harmonização e maior previsibilidade: 12/2006 - A abordagem para novos entrantes e encerramentos 10/2006 - Leilão de licenças de emissão de CO2 na EU ETS 10/2006 - Harmonização de metodologias de alocação 12/2006 - Relatório sobre a competitividade internacional Grupo de trabalho da ECCP sobre o comércio de emissões na revisão do EU ETS 15/06/2007 - Relatório final da 4ª reunião Ligação em Sistemas de Comércio de Emissões em Terceiros Países 22/05/2007 - Relatório final da 3ª reunião sobre Harmonização Adicional e Previsibilidade Aumentada 26/04/2007 - Relatório Final da 2ª reunião sobre Cumprimento e Execução Robustos 09/03/2007 - Relatório final da primeira reunião sobre o âmbito da directiva.
Proposta da Comissão de Outubro de 2001.
22/01/2002 - Não-documento sobre sinergias entre a proposta de comércio de emissões da CE (COM (2001) 581) e a Directiva IPPC 23/10/2001 - COM (2001) 581 - Proposta de directiva-quadro relativa ao comércio de emissões de gases com efeito de estufa na Comunidade Europeia.
Reacção da Comissão à leitura da proposta no Conselho e no Parlamento (incluindo a posição comum do Conselho)
18/07/2003 - COM (2003) 463 - Parecer da Comissão sobre as alterações do Parlamento Europeu à posição comum do Conselho respeitante à proposta de directiva do Parlamento Europeu e do Conselho 20/06/2003 - COM (2003) 364 - Comunicação da Comissão ao Parlamento Europeu relativa à posição comum do Conselho sobre a adopção de uma directiva que estabelece um regime de comércio de licenças de emissão de gases com efeito de estufa na Comunidade e altera a Directiva 96/61 / CE 18/03/2003 - Posição Comum ) 28.2003 - Posição Comum do Conselho sobre a adopção de uma directiva que estabelece um regime de comércio de licenças de emissão de gases com efeito de estufa na Comunidade e altera a Directiva 96/61 / CE do Conselho 27/11/2002 - COM (2002) 680 - Proposta alterada de directiva do Parlamento Europeu e do Conselho que estabelece um regime de comércio de licenças de emissão de gases com efeito de estufa na Comunidade e altera a Directiva 96/61 / CE do Conselho.
Abra todas as perguntas.
Perguntas e Respostas sobre o Sistema de Comércio de Emissões da UE revisado (dezembro de 2008)
Qual é o objetivo do comércio de emissões?
O objetivo do Sistema de Comércio de Emissões da UE (EU ETS) é ajudar os Estados Membros da UE a cumprir seus compromissos de limitar ou reduzir as emissões de gases de efeito estufa de maneira econômica. Permitir que as empresas participantes comprem ou vendam licenças de emissão significa que os cortes de emissões podem ser alcançados pelo menos pelo custo.
O EU ETS é a pedra angular da estratégia da UE para combater as alterações climáticas. É o primeiro sistema internacional de comércio de emissões de CO 2 no mundo e está em funcionamento desde 2005. A partir de 1 de Janeiro de 2008, aplica-se não só aos 27 Estados-Membros da UE, mas também aos outros três membros do Espaço Económico Europeu. - Noruega, Islândia e Liechtenstein. Actualmente abrange mais de 10 000 instalações nos sectores da energia e industrial, que são colectivamente responsáveis ​​por quase metade das emissões de CO 2 da UE e 40% das suas emissões totais de gases com efeito de estufa. Uma emenda à Diretiva EU ETS, acordada em julho de 2008, trará o setor da aviação para o sistema a partir de 2012.
Como funciona o comércio de emissões?
O EU ETS é um sistema de limite e comércio, ou seja, ele limita o nível geral de emissões permitidas, mas, dentro desse limite, permite que os participantes do sistema comprem e vendam licenças conforme necessário. Essas permissões são a "moeda" de negociação comum no coração do sistema. Uma licença concede ao titular o direito de emitir uma tonelada de CO2 ou a quantidade equivalente de outro gás com efeito de estufa. O teto do número total de permissões cria escassez no mercado.
No primeiro e segundo período de comércio no âmbito do regime, os Estados-Membros tiveram de elaborar planos nacionais de atribuição (NAP) que determinam o nível total de emissões do RCLE e o número de licenças de emissão que cada instalação recebe no seu país. No final de cada ano, as instalações devem devolver licenças equivalentes às suas emissões. As empresas que mantêm suas emissões abaixo do nível de suas permissões podem vender seus excedentes de licenças. Aqueles que enfrentam dificuldades em manter suas emissões alinhadas com seus subsídios têm uma escolha entre tomar medidas para reduzir suas próprias emissões - como investir em tecnologia mais eficiente ou usar fontes de energia menos intensivas em carbono - ou comprar as permissões extras necessárias no mercado. , Ou uma combinação de ambos. Tais escolhas são provavelmente determinadas por custos relativos. Dessa forma, as emissões são reduzidas onde quer que seja mais econômico fazê-lo.
Há quanto tempo o EU ETS está operando?
O EU ETS foi lançado em 1 de janeiro de 2005. O primeiro período de comércio durou três anos até o final de 2007 e foi uma fase de 'aprender fazendo' para se preparar para o segundo período de comércio crucial. O segundo período de comércio teve início em 1 de janeiro de 2008 e dura cinco anos até o final de 2012. A importância do segundo período de comércio decorre do fato de coincidir com o primeiro período de compromisso do Protocolo de Quioto, durante o qual a UE e outras os países industrializados devem cumprir suas metas para limitar ou reduzir as emissões de gases de efeito estufa. Para o segundo período de comércio, as emissões do RCLE-UE foram limitadas em cerca de 6,5% abaixo dos níveis de 2005 para ajudar a garantir que a UE como um todo, e os Estados-Membros individualmente, cumpram os seus compromissos de Quioto.
Quais são as principais lições aprendidas com a experiência até agora?
O EU ETS colocou um preço no carbono e provou que o comércio de emissões de gases de efeito estufa funciona. O primeiro período de comércio estabeleceu com sucesso o comércio livre de licenças de emissão em toda a UE, criou a infraestrutura necessária e desenvolveu um mercado dinâmico de carbono. Os benefícios ambientais da primeira fase poderão ser limitados devido à atribuição excessiva de licenças em alguns Estados-Membros e alguns sectores, devido principalmente a uma dependência das projecções das emissões antes de os dados das emissões verificadas serem disponibilizados no âmbito do RCLE-UE. Quando a publicação dos dados de emissões verificadas para 2005 destacou essa “superalocação”, o mercado reagiu como seria esperado, baixando o preço de mercado das permissões. A disponibilidade de dados de emissões verificadas permitiu à Comissão assegurar que o limite para as dotações nacionais na segunda fase seja estabelecido a um nível que resulte em reduções reais das emissões.
Para além de sublinhar a necessidade de dados verificados, a experiência até à data demonstrou que uma maior harmonização no âmbito do RCLE-UE é imperativa para garantir que a UE atinja os seus objetivos de redução de emissões pelo menor custo e com distorções de concorrência mínimas. A necessidade de mais harmonização é mais clara no que diz respeito ao modo como é estabelecido o limite para as licenças de emissão globais.
Os dois primeiros períodos de comércio mostram também que os métodos nacionais amplamente divergentes de atribuição de licenças a instalações ameaçam a concorrência leal no mercado interno. Além disso, é necessária uma maior harmonização, clarificação e aperfeiçoamento no que diz respeito ao âmbito do sistema, ao acesso a créditos de projectos de redução de emissões fora da UE, às condições de ligação do RCLE-UE aos sistemas de comércio de emissões noutros locais e à monitorização, verificação e requisitos de relatórios.
Quais são as principais mudanças no EU ETS e a partir de quando elas serão aplicadas?
As alterações de projeto acordadas serão aplicadas a partir do terceiro período de comércio, ou seja, janeiro de 2013. Embora o trabalho preparatório seja iniciado imediatamente, as regras aplicáveis ​​não serão alteradas até janeiro de 2013 para garantir que a estabilidade regulatória seja mantida.
O EU ETS no terceiro período será um sistema mais eficiente, mais harmonizado e mais justo.
O aumento da eficiência é conseguido através de um período comercial mais longo (8 anos em vez de 5 anos), um limite de emissões robusto e decrescente anual (redução de 21% em 2020 em comparação com 2005) e um aumento substancial na quantidade de leilões. 4% na fase 2 para mais da metade na fase 3).
Foi harmonizada mais harmonização em muitos domínios, incluindo no que diz respeito à fixação de limites (limite máximo à escala da UE em vez dos limites nacionais nas fases 1 e 2) e às regras para a atribuição gratuita a título transitório.
A equidade do sistema foi substancialmente aumentada pela passagem para regras de atribuição de licenças de emissão em toda a UE para instalações industriais e pela introdução de um mecanismo de redistribuição que permite aos novos Estados-Membros leiloar mais licenças.
Como o texto final se compara à proposta inicial da Comissão?
As metas climáticas e energéticas acordadas pelo Conselho Europeu da Primavera de 2007 foram mantidas e a arquitectura global da proposta da Comissão sobre o RCLE-UE permanece intacta. Ou seja, haverá um limite máximo a nível da UE sobre o número de licenças de emissão e este limite diminuirá anualmente ao longo de uma linha de tendência linear, que continuará para além do final do terceiro período de comércio (2013-2020). A principal diferença em relação à proposta é que o leilão de licenças será introduzido gradualmente.
Quais são as principais alterações em relação à proposta da Comissão?
Em resumo, as principais alterações feitas na proposta são as seguintes:
Alguns Estados-Membros podem beneficiar de uma derrogação facultativa e temporária à regra segundo a qual não devem ser atribuídos licenças de emissão a geradores de eletricidade a partir de 2013. Esta possibilidade de derrogação está à disposição dos Estados-Membros que preencham determinadas condições relacionadas com a interconexão da sua eletricidade. rede, quota de um único combustível fóssil na produção de electricidade e PIB / capita em relação à média da UE-27. Além disso, o montante de licenças gratuitas que um Estado-Membro pode atribuir às centrais eléctricas está limitado a 70% das emissões de dióxido de carbono das instalações pertinentes na fase 1 e diminui nos anos seguintes. Além disso, a atribuição a título gratuito na fase 3 só pode ser concedida a centrais eléctricas em funcionamento ou em construção, o mais tardar no final de 2008. Ver resposta à pergunta 15 abaixo. A directiva conterá mais pormenores sobre os critérios a utilizar para determinar os sectores ou subsectores considerados expostos a um risco significativo de fuga de carbono e uma data anterior de publicação da lista da Comissão sobre esses sectores (31 de Dezembro). 2009). Além disso, sujeito a revisão quando for alcançado um acordo internacional satisfatório, as instalações em todas as indústrias expostas receberão 100% de licenças gratuitas na medida em que usem a tecnologia mais eficiente. A alocação gratuita à indústria é limitada à participação das emissões dessas indústrias no total de emissões em 2005 a 2007. O número total de permissões alocadas gratuitamente a instalações em setores industriais declinará anualmente de acordo com o declínio do limite de emissões. Os Estados-Membros podem igualmente compensar certas instalações por custos de CO 2 repercutidos nos preços da electricidade se os custos do CO 2 os pudessem expor ao risco de fuga de carbono. A Comissão comprometeu-se a alterar as orientações comunitárias em matéria de auxílios estatais a favor do ambiente. Veja a resposta à questão 15 abaixo. O nível de leilões de licenças para a indústria não exposta aumentará de forma linear, como proposto pela Comissão, mas, em vez de atingir 100% até 2020, atingirá 70%, tendo em vista atingir 100% até 2027. Tal como previsto Na proposta da Comissão, 10% dos subsídios para leilões serão redistribuídos dos Estados Membros com alta renda per capita para aqueles com baixa renda per capita, a fim de fortalecer a capacidade financeira destes últimos de investir em tecnologias amigas do clima. Foi adicionada uma provisão para outro mecanismo redistributivo de 2% das licenças de emissão em leilão, a fim de ter em conta os Estados-Membros que, em 2005, conseguiram uma redução de pelo menos 20% das emissões de gases com efeito de estufa em comparação com o ano de referência estabelecido pelo Protocolo de Quioto. A percentagem de receitas leiloadas que os Estados-Membros devem utilizar para combater e adaptar-se às alterações climáticas, principalmente na UE, mas também nos países em desenvolvimento, é aumentada de 20% para 50%. O texto prevê um complemento para o nível de uso permitido de créditos de IC / MDL no cenário de 20% para operadores existentes que receberam os orçamentos mais baixos para importar e usar tais créditos em relação a alocações e acesso a créditos no período 2008-2012. Novos setores, novos entrantes nos períodos 2013-2020 e 2008-2012 também poderão usar créditos. O montante total dos créditos que poderão ser utilizados não excederá, no entanto, 50% da redução entre 2008 e 2020. Com base numa redução de emissões mais rigorosa no contexto de um acordo internacional satisfatório, a Comissão poderá permitir acesso adicional às RCE e URE. para os operadores do regime comunitário. Veja a resposta à questão 20 abaixo. O produto do leilão de 300 milhões de permissões da reserva de novos operadores será usado para apoiar até 12 projetos e projetos de demonstração de captura e armazenamento de carbono, demonstrando tecnologias inovadoras de energia renovável. Várias condições estão associadas a este mecanismo de financiamento. Veja a resposta à questão 30 abaixo. A possibilidade de optar por pequenas instalações de combustão, desde que sujeitas a medidas equivalentes, foi alargada a todas as pequenas instalações independentemente da actividade, o limiar de emissões aumentou de 10.000 para 25.000 toneladas de CO 2 por ano e o limiar de capacidade que instalações de combustão tem que cumprir, além disso foi elevado de 25MW para 35MW. Com estes limiares aumentados, a percentagem de emissões abrangidas que potencialmente seriam excluídas do sistema de comércio de emissões torna-se significativa e, consequentemente, foi adicionada uma provisão para permitir uma redução correspondente do limite de licenças a nível da UE.
Ainda haverá planos nacionais de alocação (NAPs)?
Não. Nos seus PAN nos primeiros (2005-2007) e no segundo (2008-2012) períodos de comércio, os Estados-Membros determinaram a quantidade total de licenças a emitir - o limite máximo - e como estas seriam atribuídas às instalações em causa. Esta abordagem gerou diferenças significativas nas regras de alocação, criando um incentivo para que cada Estado-Membro favoreça o seu próprio setor e tenha levado a uma grande complexidade.
A partir do terceiro período de comércio, haverá um limite único a nível da UE e as licenças serão atribuídas com base em regras harmonizadas. Os planos nacionais de atribuição não serão, portanto, mais necessários.
Como será determinado o limite de emissões na fase 3?
As regras para o cálculo do limite a nível da UE são as seguintes:
A partir de 2013, o número total de licenças diminuirá anualmente de maneira linear. O ponto de partida desta linha é a quantidade total média de licenças (fase 2 limite) a ser emitida pelos Estados Membros para o período 2008-12, ajustada para refletir o escopo ampliado do sistema a partir de 2013, bem como quaisquer instalações pequenas que os Membros Estados optaram por excluir. O fator linear pelo qual a quantidade anual deve diminuir é de 1,74% em relação ao limite da fase 2.
O ponto de partida para determinar o fator linear de 1,74% é a redução geral de 20% dos gases de efeito estufa em relação a 1990, o que equivale a uma redução de 14% em relação a 2005. No entanto, uma redução maior é exigida do EU ETS porque é mais barato reduzir as emissões nos sectores do RCLE. A divisão que minimiza o custo total de redução é:
uma redução de 21% nas emissões do setor RCLE-UE em relação a 2005 até 2020; uma redução de cerca de 10% em relação a 2005 para os sectores não abrangidos pelo RCLE-UE.
A redução de 21% em 2020 resulta em um teto ETS em 2020 de um máximo de 1720 milhões de permissões e implica um limite médio de 3ª fase (2013 a 2020) de cerca de 1846 milhões de permissões e uma redução de 11% em comparação com o limite da fase 2.
Todos os números absolutos indicados correspondem à cobertura no início do segundo período de negociação e, portanto, não levam em conta a aviação, que será adicionada em 2012, e outros setores que serão adicionados na fase 3.
Os valores finais para os limites anuais de emissões na fase 3 serão determinados e publicados pela Comissão até 30 de Setembro de 2010.
Como será determinado o limite de emissões além da fase 3?
O fator linear de 1,74% usado para determinar o limite da fase 3 continuará a ser aplicado além do final do período de comércio em 2020 e determinará o limite para o quarto período de comércio (2021 a 2028) e além. Pode ser revisto até 2025, o mais tardar. De fato, reduções significativas de emissão de 60% -80% em relação a 1990 serão necessárias até 2050 para atingir o objetivo estratégico de limitar o aumento da temperatura média global a não mais de 2 ° C acima dos níveis pré-industriais.
Um limite de licenças de emissão para toda a UE será determinado para cada ano. Isto reduzirá a flexibilidade das instalações em causa?
Não, a flexibilidade para instalações não será reduzida de forma alguma. Em qualquer ano, as licenças de emissão a serem leiloadas e distribuídas devem ser emitidas pelas autoridades competentes até 28 de fevereiro. A última data para os operadores devolverem licenças é 30 de abril do ano seguinte ao ano em que as emissões ocorreram. Assim, os operadores recebem licenças para o ano em curso antes de terem de devolver as licenças para cobrir as suas emissões do ano anterior. As tolerâncias permanecem válidas durante todo o período de negociação e quaisquer provisões excedentes podem agora ser "depositadas" para uso em períodos de negociações subseqüentes. Nesse aspecto, nada mudará.
O sistema permanecerá com base nos períodos de negociação, mas o terceiro período de negociação durará oito anos, de 2013 a 2020, em oposição a cinco anos para a segunda fase, de 2008 a 2012.
Para o segundo período de comércio, os Estados-Membros decidiram geralmente atribuir quantidades totais iguais de licenças para cada ano. A redução linear a cada ano a partir de 2013 corresponderá melhor às tendências esperadas de emissões no período.

Emissões de comércio.
O comércio de emissões (ou comércio de emissões) é uma abordagem administrativa usada para controlar a poluição, fornecendo incentivos econômicos para obter reduções nas emissões de poluentes. Às vezes é chamado de cap and trade.
A central authority (usually a government or international body) sets a limit or cap on the amount of a pollutant that can be emitted. Companies or other groups are issued emission permits and are required to hold an equivalent number of allowances (or credits ) which represent the right to emit a specific amount. The total amount of allowances and credits cannot exceed the cap, limiting total emissions to that level. Companies that need to increase their emission allowance must buy credits from those who pollute less. The transfer of allowances is referred to as a trade. In effect, the buyer is paying a charge for polluting, while the seller is being rewarded for having reduced emissions by more than was needed. Thus, in theory, those that can easily reduce emissions most cheaply will do so, achieving the pollution reduction at the lowest possible cost to society. [1]
There are active trading programs in several pollutants. For greenhouse gases the largest is the European Union Emission Trading Scheme. [2] In the United States there is a national market to reduce acid rain and several regional markets in nitrous oxide. [3] Markets for other pollutants tend to be smaller and more localized.
Carbon trading is sometimes seen as a better approach than a direct carbon tax or direct regulation. By solely aiming at the cap it avoids the consequences and compromises that often accompany other methods. It can be cheaper, and politically preferable for existing industries because the initial allocation of allowances is often allocated with a grandfathering provision where rights are issued in proportion to historical emissions. In addition, most of the money in the system is spent on environmental activities, and the investment directed at sustainable projects that earn credits in the developing world can contribute to the Millennium Development Goals. Critics of emissions trading point to problems of complexity, monitoring, enforcement, and sometimes dispute the initial allocation methods and cap. [4]
Overview Edit.
The overall goal of an emissions trading plan is to reduce emissions. The cap is usually lowered over time - aiming towards a national emissions reduction target. In other systems a portion of all traded credits must be retired, causing a net reduction in emissions each time a trade occurs. In many cap and trade systems, organizations which do not pollute may also participate, thus environmental groups can purchase and retire allowances or credits and hence drive up the price of the remainder according to the law of demand.
See also: Error: Template must be given at least one article name Corporations can also prematurely retire allowances by donating them to a nonprofit entity and then be eligible for a tax deduction.
Because emissions trading uses markets to determine how to deal with the problem of pollution, it is often touted as an example of effective free market environmentalism. While the cap is usually set by a political process, individual companies are free to choose how or if they will reduce their emissions. In theory, firms will choose the least-costly way to comply with the pollution regulation, creating incentives that reduce the cost of achieving a pollution reduction goal.
History Edit.
The efficacy of, what later was to be called, the "Cap and Trade" approach to air pollution abatement was first demonstrated in a series of micro-economic computer simulation studies between 1967 and 1970 for the National Air Pollution Control Administration (predecessor to the EPA Air Office) by Ellison Burton and William Sanjour. These studies used mathematical models of several cities and their emission sources in order to compare the cost and effectiveness of various control strategies. [5] [6] [7] [8] [9] For each abatement strategy comparison was made with the "least cost solution" produced by a computer optimization program which finds the least costly combination of source reductions to achieve a given abatement goal. [10] In each case it was found that the least cost solution was dramatically less costly for the same level of pollution produced by any conventional abatement strategy. [11] This led to the concept of "Cap and Trade" as a means of achieving the "least cost solution" for a given level of abatement.
The development of emissions trading over the course of its history can be divided into four phases [12] :
Gestation: Theoretical articulation of the instrument (by Coase, Dales, Montgomery etc) and, independent of the former, tinkering with "flexible regulation" at the US Environmental Protection Agency Proof of Principle: First developments towards trading of emission certificates based on the "offset-mechanism" taken up in Clean Air Act in 1977. Prototype: Launching of a first "cap and trade" system as part of US Acid Rain Program, officially announced as a paradigm shift in environmental policy, as prepared by "Project 88", a network building effort to bring together environmental and industrial interests in the US Regime formation: branching out from US clean air policy to global climate policy, and from there to the European Union, along with the expectation of an emerging global carbon market and the formation of the "carbon industry".
Cap and trade versus baseline and credit Edit.
The textbook emissions trading program can be called a "cap and trade" approach in which an aggregate cap on all sources is established and these sources are then allowed to trade amongst themselves to determine which sources actually emit the total pollution load. An alternative approach with important differences is a baseline and credit program. [13] In a baseline and credit program a set of polluters that are not under an aggregate cap can create credits by reducing their emissions below a baseline level of emissions. These credits can be purchased by polluters that do have a regulatory limit. Many of the criticisms of trading in general are targeted at baseline and credit programs rather than cap type programs.
The economics of international emissions trading Edit.
It's possible for a country to reduce emissions using a Command-Control approach, such as regulation, direct and indirect taxes. But that approach is more costly for some countries than for others. That's because the Marginal Abatement Cost (MAC) — the cost of eliminating an additional unit of pollution — differs by country. It might cost China $2 to eliminate a ton of CO 2 , but it would probably cost Sweden or the U. S. much more. International emissions-trading markets were created precisely to exploit differing MACs.
Example Edit.
Emissions trading can benefit both the buyer and the seller through 'Gains from Trade'.
Consider two European countries, namely Germany and Sweden. Each can either reduce all the required amount of emissions by itself or it can choose to buy or sell in the market.
For this example let us assume that Germany can abate its CO 2 at a much cheaper cost than Sweden, e. g. MAC S > MAC G where the MAC curve of Sweden is steeper (higher slope) than that of Germany, and R Req is the total amount of emissions that need to be reduced by a country.
On the left side of the graph is the MAC curve for Germany. R Req is the amount of required reductions for Germany, but at R Req the MAC G curve has not intersected the market allowance price of CO 2 (market allowance price = P = λ). Thus, given the market price of CO 2 allowances, Germany has potential to profit if it abates more emissions than required.
On the right side is the MAC curve for Sweden. R Req is the amount of required reductions for Sweden, but the MAC S curve already intersects the market price of CO 2 allowances before R Req has been reached. Thus, given the market allowance price of CO 2 , Sweden has potential to profit if it abates fewer emissions than required internally, and instead abates them elsewhere.
In this example Sweden would abate emissions until its MAC S intersects with P (at R*), but this would only reduce a fraction of Sweden’s total required abatement. After that it could buy emissions credits from Germany for the price 'P' (per unit). The internal cost of Sweden’s own abatement, combined with the credits it buys in the market from Germany, adds up to the total required reductions (R Req ) for Sweden. Thus Sweden can also profit from buying credits in the market (Δ d-e-f). This represents the ‘Gains from Trade’, the amount of additional expense that Sweden would otherwise have to spend if it abated all of its required emissions by itself without trading.
Germany made a profit by abating more emissions than required: it met the regulations by abating all of the emissions that was required of it (R Req ). Additionally, Germany sold its surplus to Sweden as credits, and was paid 'P' for every unit it abated, while spending less than 'P'. Its total revenue is the area of the graph (R Req 1 2 R*), its total abatement cost is area (R Req 3 2 R*), and so its net benefit from selling emission credits is the area (Δ 1-2-3) i. e. Gains from Trade.
The two R* (on both graphs) represent the efficient allocations that arise from trading.
Germany: sold (R* - R Req ) emission credits to Sweden at a unit price 'P'. Sweden bought emission credits from Germany at a unit price 'P'.
If the total cost for reducing a particular amount of emissions in the 'Command Control' scenario is called 'X', then to reduce the same amount of combined pollution in Sweden and Germany, the total abatement cost would be less in the 'Emissions Trading' scenario i. e. (X - Δ 123 - Δ def).
The example above applies not just at the national level: it applies just as well between two companies in different countries, or between two subsidiaries within the same company.
Applying the economic theory Edit.
The nature of the pollutant plays a very important role when policy-makers decide which framework should be used to control pollution.
CO 2 acts globally, thus its impact on the environment is generally similar wherever in the globe it is released. So the location of the originator of the emissions does not really matter from an environmental standpoint.
The policy framework should be different for regional pollutants [14] (e. g. SO 2 and NO X , and also Mercury) because the impact exerted by these pollutants may not be the same in all locations. The same amount of a regional pollutant can exert a very high impact in some locations and a low impact in other locations, so it does actually matter where the pollutant is released. This is known as the 'Hot Spot' problem.
A Lagrange framework is commonly used to determine the least cost of achieving an objective, in this case the total reduction in emissions required in a year. In some cases it is possible to use the Lagrange optimization framework to determine the required reductions for each country (based on their MAC) so that the total cost of reduction is minimized. In such a scenario, the Lagrange Multiplier represents the market allowance price (P) of a pollutant, such as the current market allowance price of emissions in Europe [15] and the USA. [16]
All countries face the market allowance price as existent in the market that day, so they are able to make individual decisions that would maximize their profit while at the same time achieving regulatory compliance. This is also another version of the Equi-Marginal Principle, commonly used in economics to choose the most economically efficient decision.
Prices versus quantities, and the safety valve Edit.
There has been longstanding debate on the relative merits of price versus quantity instruments to achieve emission reductions. [17]
An emission cap and permit trading system is a quantity instrument because it fixes the overall emission level (quantity) and allows the price to vary. One problem with the cap and trade system is the uncertainty of the cost of compliance as the price of a permit is not known in advance and will vary over time according to market conditions. In contrast, an emission tax is a price instrument because it fixes the price while the emission level is allowed to vary according to economic activity. A major drawback of an emission tax is that the environmental outcome (e. g. a limit on the amount of emissions) is not guaranteed.
The best choice depends on the sensitivity of the costs of emission reduction, compared to the sensitivity of the benefits (i. e., climate damages avoided by a reduction) when the level of emission control is varied.
Because there is high uncertainty in the compliance costs of firms, some argue that the optimum choice is the price mechanism.
However, some scientists have warned of a threshold in atmospheric concentrations of carbon dioxide beyond which a run-away warming effect could take place, with a large possibility of causing irreversible damages. If this is a conceivable risk then a quantity instrument could be a better choice because the quantity of emissions may be capped with a higher degree of certainty. However, this may not be true if this risk exists but cannot be attached to a known level of GHG concentration or a known emission pathway. [18]
A third option, known as a safety valve , is a hybrid of the price and quantity instruments. The system is essentially an emission cap and tradeable permit system but the maximum (or minimum) permit price is capped. Emitters have the choice of either obtaining permits in the marketplace or purchasing them from the government at a specified trigger price (which could be adjusted over time). The system is sometimes recommended as a way of overcoming the fundamental disadvantages of both systems by giving governments the flexibility to adjust the system as new information comes to light. It can be shown that by setting the trigger price high enough, or the number of permits low enough, the safety valve can be used to mimic either a pure quantity or pure price mechanism. [19]
All three methods are being used as policy instruments to control greenhouse gas emissions: the EU-ETS is a quantity system using the cap and trading system to meet targets set by National Allocation Plans, the UK's Climate Change Levy is a price system using a direct carbon tax, while China uses the CO 2 market price for funding of its Clean Development Mechanism projects, but imposes a safety valve of a minimum price per tonne of CO 2 .
Trading systems Edit.
Kyoto Protocol Edit.
The Kyoto Protocol is a 1997 international treaty which came into force in 2005, which binds most developed nations to a cap and trade system for the six major greenhouse gases. [20] (The United States is the only industrialized nation under Annex I which has not ratified and therefore is not bound by it.) Emission quotas were agreed by each participating country, with the intention of reducing their overall emissions by 5.2% of their 1990 levels by the end of 2012. Under the treaty, for the 5-year compliance period from 2008 until 2012, [21] nations that emit less than their quota will be able to sell emissions credits to nations that exceed their quota.
It is also possible for developed countries within the trading scheme to sponsor carbon projects that provide a reduction in greenhouse gas emissions in other countries, as a way of generating tradeable carbon credits. The Protocol allows this through Clean Development Mechanism (CDM) and Joint Implementation (JI) projects, in order to provide flexible mechanisms to aid regulated entities in meeting their compliance with their caps. The UNFCCC validates all CDM projects to ensure they create genuine additional savings and that there is no leakage .
The Intergovernmental Panel on Climate Change has projected that the financial effect of compliance through trading within the Kyoto commitment period will be 'limited' at between 0.1-1.1% of GDP among trading countries. [22] By comparison the Stern report placed the costs of doing nothing at five to 20 times higher. [23]
Australia Edit.
Garnaut Draft Report Edit.
In 2003 the New South Wales (NSW) state government unilaterally established the NSW Greenhouse Gas Abatement Scheme to reduce emissions by requiring electricity generators and large consumers to purchase NSW Greenhouse Abatement Certificates (NGACs). This has prompted the rollout of free energy-efficient compact fluorescent lightbulbs and other energy-efficiency measures, funded by the credits. This scheme has been criticised by the Centre for Energy and Environmental Markets of the UNSW (CEEM) because of its reliance upon offsets. [24]
On 4 June 2007, former Prime Minister John Howard announced an Australian Carbon Trading Scheme to be introduced by 2012, but opposition parties called the plan "too little, too late." [25] On 24 November 2007 Howard's coalition government lost a general election and was succeeded by the Labor Party, with Kevin Rudd taking over as prime minister. Prime Minister Rudd announced that a cap-and-trade emissions trading scheme would be introduced in 2010. [26]
Australia's Commonwealth, State and Territory Governments commissioned the Garnaut Climate Change Review, a study by Professor Ross Garnaut on the mechanism of a potential emissions trading scheme. Its interim report was released on 21 February 2008. [27] It recommended an emissions trading scheme that includes transportation but not agriculture, and that emissions permits should be sold competitively and not allocated free to carbon polluters. It recognised that energy prices will increase and that low income families will need to be compensated. It recommended more support for research into low emissions technologies and a new body to oversee such research. It also recognised the need for transition assistance for coal mining areas. [28]
In response to Garnaut's draft report, the Rudd Labor government issued a Green Paper [29] on 16 July that described the intended design of the actual trading scheme. Draft legislation will be released in December 2008, to become law in 2009. [30]
European Union Edit.
The European Union Emission Trading Scheme (or EU ETS) is the largest multi-national, greenhouse gas emissions trading scheme in the world and was created in conjunction with the Kyoto Protocol.
After voluntary trials in the UK and Denmark, Phase I commenced operation in January 2005 with all 15 (now 25 of the 27) member states of the European Union participating. [31] The program caps the amount of carbon dioxide that can be emitted from large installations, such as power plants and carbon intensive factories and covers almost half of the EU's Carbon Dioxide emissions. [32] Phase I permits participants to trade amongst themselves and in validated credits from the developing world through Kyoto's Clean Development Mechanism.
Whilst the first phase (2005 - 2007) has received much criticism due to oversupply of allowances and the distribution method of allowances (via grandfathering rather than auctioning), Phase II links the ETS to other countries participating in the Kyoto trading system. The European Commission has been tough on Member States' Plans for Phase II, dismissing many of them as being too loose again. [33] In addition, the first phase has established a strong carbon market. Compliance was high in 2006, increasing confidence in the scheme, although the value of allowances dropped when the national caps were met.
All EU member states have ratified the Kyoto Protocol, and so the second phase of the EU ETS has been designed to support the Kyoto mechanisms and compliance period. Thus any organisation trading through the ETS should also meet the international trading obligations under Kyoto.
New Zealand Edit.
The New Zealand Government introduced a bill for emissions trading schemes before a select committee. Various reports by a range of groups support the scheme but differ in opinion as to how it should be implemented. [34] An interesting feature of the New Zealand ETS is that it includes forest carbon and creates deforestation liabilities for landowners. [35]
The emissions trading bill passed into law on 10 September 2008. On November 16 2008 the newly formed National-led government announced that it would delay implementation of the ETS pending a full review of climate change policy.
United States Edit.
Template:Related An early example of an emission trading system has been the SO 2 trading system under the framework of the Acid Rain Program of the 1990 Clean Air Act in the U. S. Under the program, which is essentially a cap-and-trade emissions trading system, SO 2 emissions are expected to be reduced by 50 percent from 1980 levels by 2010. Some experts argue that the "cap and trade" system of SO 2 emissions reduction has reduced the cost of controlling acid rain by as much as 80 percent versus source-by-source reduction.
In 1997, the State of Illinois adopted a trading program for volatile organic compounds in most of the Chicago area, called the Emissions Reduction Market System. [36] Beginning in 2000, over 100 major sources of pollution in eight Illinois counties began trading pollution credits.
In 2003, New York State proposed and attained commitments from nine Northeast states to form a cap and trade carbon dioxide emissions program for power generators, called the Regional Greenhouse Gas Initiative (RGGI). This program is due to launch on January 1 2009 with the aim to reduce the carbon "budget" of each state's electricity generation sector to 10 percent below their 2009 allowances by 2018. [37]
Also in 2003, U. S. corporations were able to trade CO 2 emission allowances on the Chicago Climate Exchange under a voluntary scheme. In August 2007, the Exchange announced a mechanism to create emission offsets for projects within the United States that cleanly destroy ozone-depleting substances. [38]
In 2007, the California Legislature passed the California Global Warming Solutions Act, AB-32, which was signed into law by Governor Arnold Schwarzenegger. Thus far, flexible mechanisms in the form of project based offsets have been suggested for five main project types. A carbon project would create offsets by showing that it has reduced carbon dioxide and equivalent gases. The project types include: manure management, forestry, building energy, SF6, and landfill gas capture. California is also one of seven states and three Canadian province that have joined together to create the Western Climate Initiative, which has recommended the creation of a regional greenhouse gas control and offset trading environment. [39]
In a talk recorded for YouTube ( it. youtube/watch? v=hvG2XptIEJk ) President Elect Barack Obama on Nov 17 2008 clarified that the US will enter a cap and trade system to limit Global Warming.
Renewable energy certificates Edit.
Renewable Energy Certificates, or "green tags", are transferable rights for renewable energy within some American states. A renewable energy provider gets issued one green tag for each 1,000 KWh of energy it produces. The energy is sold into the electrical grid, and the certificates can be sold on the open market for additional profit. They are purchased by firms or individuals in order to identify a portion of their energy with renewable sources and are voluntary.
They are typically used like an offsetting scheme or to show corporate responsibility, although their issuance is unregulated, with no national registry to ensure there is no double-counting. However, it is one way that an organization could purchase its energy from a local provider who uses fossil fuels, but back it with a certificate that supports a specific wind or hydro power project.
The carbon market Edit.
Carbon emissions trading is emissions trading specifically for carbon dioxide (calculated in tonnes of carbon dioxide equivalent or tCO 2 e) and currently makes up the bulk of emissions trading. It is one of the ways countries can meet their obligations under the Kyoto Protocol to reduce carbon emissions and thereby mitigate global warming.
Market trend Edit.
Carbon emissions trading has been steadily increasing in recent years. According to the World Bank's Carbon Finance Unit, 374 million metric tonnes of carbon dioxide equivalent (tCO 2 e) were exchanged through projects in 2005, a 240% increase relative to 2004 (110 mtCO 2 e) [40] which was itself a 41% increase relative to 2003 (78 mtCO 2 e). [41]
In terms of dollars, the World Bank has estimated that the size of the carbon market was 11 billion USD in 2005, 30 billion USD in 2006 [40] , and 64 billion in 2007 [42] .
The Marrakesh Accords of the Kyoto protocol defined the international trading mechanisms and registries needed to support trading between countries, with allowance trading now occurring between European countries and Asian countries. However, while the USA as a nation did not ratify the Protocol, many of its states are now developing cap-and-trade systems and are looking at ways to link their emissions trading systems together, nationally and internationally, to seek out the lowest costs and improve luidity of the market. [43] However, these states also wish to preserve their individual integrity and unue features. For example, in contrast to the other Kyoto-compliant systems, some states propose other types of greenhouse gas sources, different measurement methods, setting a maximum on the price of allowances, or restricting access to CDM projects. Creating instruments that are not truly fungible would introduce instability and make pricing difficult. Various proposals are being investigated to see how these systems might be linked across markets, with the International Carbon Action Partnership (ICAP) as an international body to help co-ordinate this. [44] [45]
Business reaction Edit.
With the creation of a market for mandatory trading of carbon dioxide emissions within the Kyoto Protocol, the London financial marketplace has established itself as the center of the carbon finance market, and is expected to have grown into a market valued at $60 billion in 2007. [46] The voluntary offset market, by comparison, is projected to grow to about $4bn by 2010. [47]
23 multinational corporations came together in the G8 Climate Change Roundtable, a business group formed at the January 2005 World Economic Forum. The group included Ford, Toyota, British Airways, BP and Unilever. On 9 June 2005 the Group published a statement stating that there was a need to act on climate change and stressing the importance of market-based solutions. It called on governments to establish "clear, transparent, and consistent price signals" through "creation of a long-term policy framework" that would include all major producers of greenhouse gases. [48] By December 2007 this had grown to encompass 150 global businesses. [49]
Business in the UK have come out strongly in support of emissions trading as a key tool to mitigate climate change, supported by Green NGOs. [50]
Measuring, reporting, verification (MRV) and enforcement Edit.
Meaningful emission reductions within a trading system can only occur if they can be measured at the level of operator or installation and reported to a regulator. For greenhouse gases all trading countries maintain an inventory of emissions at national and installation level; in addition, the trading groups within North America maintain inventories at the state level through The Climate Registry. For trading between regions these inventories must be consistent, with equivalent units and measurement technues.
In some industrial processes emissions can be physically measured by inserting sensors and flowmeters in chimneys and stacks, but many types of activity rely on theoretical calculations for measurement. Depending on local legislation, these measurements may require additional checks and verification by government or third party auditors, prior or post submission to the local regulator.
Another critical part is enforcement. [51] Without effective MRV and enforcement the value of allowances are diminished. Enforcement can be done using several means, including fines or sanctioning those that have exceeded their allowances. Concerns include the cost of MRV and enforcement and the risk that facilities may be tempted to mislead rather than make real reductions or make up their shortfall by purchasing allowances or offsets from another entity. The net effect of a corrupt reporting system or poorly managed or financed regulator may be a discount on emission costs, and a (hidden) increase in actual emissions.
Criticism Edit.
There are critics of the methods, mainly environmental justice NGOs and movements, who see carbon trading as a proliferation of the free market into public spaces and environmental policy-making. [52] They level accusations of failures in accounting, dubious science and the destructive impacts of projects upon local peoples and environments as reasons why trading pollution allowances should be avoided. [53] In its place they advocate making reductions at the source of pollution and energy policies that are justice-based and community-driven. [54] Most of the criticisms have been focused on the carbon market created through investment in Kyoto Mechanisms. Criticism of 'cap and trade' emissions trading has generally been more limited to lack of credibility in the first phase of the EU ETS.
Critics argue that emissions trading does little to solve pollution problems overall, as groups that do not pollute sell their conservation to the highest bidder. Overall reductions would need to come from a sufficient and challenging reduction of allowances available in the system.
Regulatory agencies run the risk of issuing too many emission credits, diluting the effectiveness of regulation, and practically removing the cap. In this case, instead of any net reduction in carbon dioxide emissions, beneficiaries of emissions trading simply do more of the polluting activity. The National Allocation Plans by member governments of the European Union Emission Trading Scheme were criticised for this when it became apparent that actual emissions would be less than the government-issued carbon allowances at the end of Phase I of the scheme.
They have also been criticised for the practice of grandfathering, where polluters are given free allowances by governments, instead of being made to pay for them. [55] Critics instead advocate for auctioning the credits. The proceeds could be used for research and development of sustainable technology. [56]
Critics of carbon trading, such as Carbon Trade Watch, argue that it places disproportionate emphasis on individual lifestyles and carbon footprints, distracting attention from the wider, systemic changes and collective political action that needs to be taken to tackle climate change. [57] . Groups such as the Corner House (organisation) have argued that the market will choose the easiest means to save a given quantity of carbon in the short term, which may be different to the pathway required to obtain sustained and sizable reductions over a longer period, and so a market led approach is likely to reinforce technological lock-in. For instance small cuts may often be achieved cheaply through investment in making a technology more efficient, where larger cuts would require scrapping the technololgy and using a different one. They also argue that emissions trading is undermining alternative approaches to pollution control with which it does not combine well, and so the overall effect it is having is to actually stall significant change to less polluting technologies.
Although many economists advocate carbon trading schemes, some others favor a carbon tax instead. Possible problems with cap and trade systems include.
See also: Error: Template must be given at least one article name : Trading may be a more complicated means of achieving the same objective Permit prices may be unstable and therefore unpredictable Some cap and trade systems pass the quota rent to business though grandfathering (a certain number of credits are given away for free rather than auctioned) Cap and trade systems could become the basis for international trade in the quota rent resulting in very large transfers across frontiers Cap and trade systems are seen to generate more corruption than a tax system The administration and legal costs of cap and trade systems are higher than with a tax A cap and trade system is seen to be impractical at level of individual household emissions.
The problem of unstable prices can be resolved, to some degree, by the creation of forward markets in caps. Nevertheless, it is easier to make a tax predictable than the price of a cap. However, the corresponding uncertainty under a tax is the level of emissions reductions achieved.
The Financial Times wrote an article on cap and trade systems that argues that "Carbon markets create a muddle" and ". leave much room for unverifiable manipulation". [58]
More recent criticism of emissions trading regarding implementation is that old growth forests (which have slow carbon absorption rates) are being cleared and replaced with fast-growing vegetation, to the detriment of the local communities. [59]
Recent proposals for alternative schemes that seek to avoid the problems of Cap and Trade schemes include Cap and Share, which at May 2008 is being actively considered by the Irish Parliament, and the Sky Trust schemes.

InformationAtmosphere.
Tagged with Emissions Trading on Wikipedia.
Emissions Trading on Wikipedia.
Emissions trading.
A coal power plant in Germany. Due to emissions trading, coal may become a less competitive fuel than other options.
Emissions trading or cap and trade is a market-based approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants. [1]
A central authority (usually a governmental body) sets a limit or cap on the amount of a pollutant that may be emitted. The limit or cap is allocated or sold to firms in the form of emissions permits which represent the right to emit or discharge a specific volume of the specified pollutant. Firms are required to hold a number of permits (or allowances or carbon credits ) equivalent to their emissions. The total number of permits cannot exceed the cap, limiting total emissions to that level. Firms that need to increase their volume of emissions must buy permits from those who require fewer permits. [1]
The transfer of permits is referred to as a trade. In effect, the buyer is paying a charge for polluting, while the seller is being rewarded for having reduced emissions. Thus, in theory, those who can reduce emissions most cheaply will do so, achieving the pollution reduction at the lowest cost to society. [2]
There are active trading programs in several air pollutants. For greenhouse gases the largest is the European Union Emission Trading Scheme, whose purpose is to avoid dangerous climate change. [3] In the United States there is a national market to reduce acid rain and several regional markets innitrogen oxides. [4] Markets for other pollutants tend to be smaller and more localized.
Pollution as an externality[edit]
By definition, an externality is an activity of one entity that affects the welfare of another entity in a way that is outside the market mechanism. [5] Pollution is the prime example most economists think of when discussing externalities. There are many different ways to address these from a public economics perspective including emissions fees, cap-and-trade, and command and control regulation. Here we will discuss cap-and-trade as the chosen public response to externalities.
Overview[edit]
The overall goal of an emissions trading plan is to minimize the cost of meeting a set emissions target or cap . [6] The cap is an enforceable limit on emissions that is usually lowered over time—aiming towards a national emissions reduction target. [6] In some systems, a proportion of all traded permits must be retired periodically, causing a net reduction in emissions over time. In many cap-and-trade systems, organizations which do not pollute (and therefore have no obligations) may also participate in trading. Thus environmental groups may purchase and retire emission permits and hence drive up the price of the remaining permits according to the law of demand. [7] Corporations can also prematurely retire allowances by donating them to a nonprofit entity and then be eligible for a tax deduction.
Definitions[edit]
The economics literature provides the following definitions of cap and trade emissions trading schemes.
A cap-and-trade system constrains the aggregate emissions of regulated sources by creating a limited number of tradable emission allowances, which emission sources must secure and surrender in number equal to their emissions. [8]
In an emissions trading or cap-and-trade scheme, a limit on access to a resource (the cap) is defined and then allocated among users in the form of permits. Compliance is established by comparing actual emissions with permits surrendered including any permits traded within the cap. [9]
Under a tradable permit system, an allowable overall level of pollution is established and allocated among firms in the form of permits. Firms that keep their emission levels below their allotted level may sell their surplus permits to other firms or use them to offset excess emissions in other parts of their facilities. [10]
Market-based and least-cost[edit]
Economy-wide pricing of carbon is the centre piece of any policy designed to reduce emissions at the lowest possible costs.
Economists have urged the use of “market-based” instruments such as emissions trading to address environmental problems instead of prescriptive “command and control” regulation. [12] Command and control regulation is criticized for being excessively rigid, insensitive to geographical and technological differences, and inefficient. [13] However, emissions trading requires a cap to effectively reduce emissions, and the cap is a government regulatory mechanism. After a cap has been set by a government political process, individual companies are free to choose how or if they will reduce their emissions. Failure to report emissions and surrender emission permits is often punishable by a further government regulatory mechanism, such as a fine that increases costs of production. Firms will choose the least-cost way to comply with the pollution regulation, which will lead to reductions where the least expensive solutions exist, while allowing emissions that are more expensive to reduce.
Emission markets[edit]
For emissions trading where greenhouse gases are regulated, one emissions permit or allowance is considered equivalent to one metric ton of carbon dioxide(CO 2 ) emissions. Other names for emissions permits are carbon credits, Kyoto units, assigned amount units, and Certified Emission Reduction units (CER). These permits or units can be sold privately or in the international market at the prevailing market price. These trade and settle internationally and hence allow allowances to be transferred between countries. Each international transfer is validated by the United Nations Framework Convention on Climate Change (UNFCCC). Each transfer of ownership within the European Union is additionally validated by the European Commission.
Trading exchanges have been established to provide a spot market in permits, as well as futures and options market to help discover a market price and maintain luidity. Carbon prices are normally quoted in Euros per tonne of carbon dioxide or its equivalent (CO 2 e). Other greenhouse gases can also be traded, but are quoted as standard multiples of carbon dioxide with respect to their global warming potential. These features reduce the quota’s financial impact on business, while ensuring that the quotas are met at a national and international level.
Currently there are six exchanges trading in UNFCCC related carbon credits: the Chicago Climate Exchange (until 2010 [14] ), European Climate Exchange, NASDAQ OMX Commodities Europe, PowerNext, Commodity Exchange Bratislava and the European Energy Exchange. NASDAQ OMX Commodities Europe listed a contract to trade offsets generated by a CDM carbon project called Certified Emission Reductions. Many companies now engage in emissions abatement, offsetting, and sequestration programs to generate credits that can be sold on one of the exchanges. At least one private electronic markethas been established in 2008: CantorCO2e. [15] Carbon credits at Commodity Exchange Bratislava are traded at special platform – Carbon place. [16]
Trading in emission permits is one of the fastest-growing segments in financial services in the City of London with a market estimated to be worth about €30 billion in 2007. Louis Redshaw, head of environmental markets at Barclays Capital, predicts that “Carbon will be the world’s biggest commodity market, and it could become the world’s biggest market overall.” [17]
History[edit]
The efficiency of what later was to be called the “cap-and-trade” approach to air pollution abatement was first demonstrated in a series of micro-economic computer simulation studies between 1967 and 1970 for the National Air Pollution Control Administration (predecessor to the United States Environmental Protection Agency‘s Office of Air and Radiation) by Ellison Burton and William Sanjour. These studies used mathematical models of several cities and their emission sources in order to compare the cost and effectiveness of various control strategies. [18] [19] [20] [21] [22] Each abatement strategy was compared with the “least cost solution” produced by a computer optimization program to identify the least costly combination of source reductions in order to achieve a given abatement goal. [23] In each case it was found that the least cost solution was dramatically less costly than the same amount of pollution reduction produced by any conventional abatement strategy. [24] Burton and later Sanjour along with Edward H. Pechan continued improving [25] and advancing [26] these computer models at the newly created U. S. Environmental Protection Agency. The agency introduced the concept of computer modeling with least cost abatement strategies (i. e. emissions trading) in its 1972 annual report to Congress on the cost of clean air. [27] This led to the concept of “cap and trade” as a means of achieving the “least cost solution” for a given level of abatement.
The development of emissions trading over the course of its history can be divided into four phases: [28]
Gestation: Theoretical articulation of the instrument (by Coase, [29] Crocker, [30] Dales, [31] Montgomery [32] etc.) and, independent of the former, tinkering with “flexible regulation” at the US Environmental Protection Agency. Proof of Principle: First developments towards trading of emission certificates based on the “offset-mechanism” taken up in Clean Air Act in 1977. Prototype: Launching of a first “cap-and-trade” system as part of the US Acid Rain Program in Title IV of the 1990 Clean Air Act, officially announced as a paradigm shift in environmental policy, as prepared by “Project 88”, a network-building effort to bring together environmental and industrial interests in the US. Regime formation: branching out from the US clean air policy to global climate policy, and from there to the European Union, along with the expectation of an emerging global carbon market and the formation of the “carbon industry”.
In the United States, the “acid rain”-related emission trading system was principally conceived by C. Boyden Gray, a G. H.W. Bush administration attorney. Gray worked with the Environmental Defense Fund (EDF), who worked with the EPA to write the bill that became law as part of the Clean Air Act of 1990. The new emissions cap on NO x and SO 2 gases took effect in 1995, and according to Smithsonian magazine, those acid rain emissions dropped 3 million tons that year. [33]
Public opinion[edit]
In the United States, most polling shows large support for emissions trading (often referred to as cap-and-trade). This majority support can be seen in polls conducted by Washington Post/ABC News, [34] Zogby International [35] and Yale University. [36]
According to PolitiFact, it’s a misconception that emissions trading is unpopular in the United States because of earlier polls from Zogby International and Rasmussen which misleadingly include “new taxes” in the questions (taxes aren’t part of emissions trading) or high energy cost estimates. [37]
Comparison of cap and trade with other methods of emission reduction[edit]
Cap and trade, offsets created through a baseline and credit approach, and a carbon tax are all market-based approaches that put a price on carbon and other greenhouse gases, and provide an economic incentive to reduce emissions, beginning with the lowest-cost opportunities.
The textbook emissions trading program can be called a “cap and trade” approach in which an aggregate cap on all sources is established and these sources are then allowed to trade emissions permits amongst themselves to determine which sources actually emit the total pollution load. An alternative approach with important differences is a baseline and credit program. [38]
In a baseline and credit program polluters that are not under an aggregate cap can create permits or credits, usually called offsets, by reducing their emissions below a baseline level of emissions. Such credits can be purchased by polluters that have a regulatory limit. [39]
Cap and trade versus carbon tax and other methods[edit]
Cap and trade versus carbon tax[edit]
Regulation by cap-and-trade emissions trading can be compared to emissions fees or environmental tax approaches under a number of possible criteria. [40]
Responsiveness to inflation: In the case of inflation, cap-and-trade is at an advantage over emissions fees because it adjusts to the new prices automatically and no legislative or regulatory action is needed.
Responsiveness to cost changes: It is difficult to tell which is better between cap-and-trade and emissions fees; therefore, it might be a better option to combine the two resulting in the creation of a safety valve price (a price set by the government at which polluters can purchase additional permits beyond the cap).
Responsiveness to recessions: This point is closely related to responsiveness to cost changes, because recessions cause a drop in demand. Under cap and trade, the emissions cost automatically decreases, so a cap-and-trade scheme adds another automatic stabilizer to the economy – in effect, a type of automatic fiscal stimulus. However, if the emissions price drops to a low level, efforts to reduce emissions will also be reduced. Assuming that a government is competently able to stimulate the economy regardless of the cap-and-trade scheme, an excessively low price represents a missed opportunity to cut emissions faster than planned, so adding a price floor (or equivalently, switching to a tax temporarily) might be better – especially when there is great urgency about cutting emissions, as with greenhouse gas emissions. A price floor would also provide a degree of certainty and stability for investment in emissions reductions: recent experiences from the UK have shown that nuclear power operators are reluctant to invest on “un-subsidised” terms unless there is a guaranteed price floor for carbon (which the EU emissions trading scheme does not presently provide).
Responsiveness to uncertainty: As with cost changes, in a world of uncertainty, it is not clear whether emissions fees or cap-and-trade systems are more efficient—it basically depends on how fast the marginal social benefits of reducing pollution fall with the amount of cleanup (e. g., whether inelastic or elastic marginal social benefit schedule).
Cap-and-trade versus command-and-control regulation[edit]
Unlike emissions fees and cap and trade, which are incentive-based regulations, command-and-control regulations take a variety of forms and are much less flexible. An example of this is a performance standard which sets an emissions goal for each polluter that is fixed and, therefore, the burden of reducing pollution cannot be shifted to the firms that can achieve it more cheaply. As a result, performance standards are unlikely to be as cost effective as cap-and-trade emissions trading. [40] Firms would charge for a higher cost for a product and a proportion of such higher cost will be passed through to the end consumers. [41]
Economics of international emissions trading[edit]
It is possible for a country to reduce emissions using a Command-Control approach, such as regulation, direct and indirect taxes. The cost of that approach differs between countries because the Marginal Abatement Cost Curve (MAC) — the cost of eliminating an additional unit of pollution — differs by country. It might cost China $2 to eliminate a ton of CO 2 , but it would probably cost Norway or the U. S. much more. International emissions-trading markets were created precisely to exploit differing MACs.
Example[edit]
Emissions trading through Gains from Trade can be more beneficial for both the buyer and the seller than a simple emissions capping scheme.
Consider two European countries, such as Germany and Sweden. Each can either reduce all the required amount of emissions by itself or it can choose to buy or sell in the market.
Example MACs for two different countries.
For this example let us assume that Germany can abate its CO 2 at a much cheaper cost than Sweden, i. e. MAC S > MAC G where the MAC curve of Sweden is steeper (higher slope) than that of Germany, and R Req is the total amount of emissions that need to be reduced by a country.
On the left side of the graph is the MAC curve for Germany. R Req is the amount of required reductions for Germany, but at R Req the MAC G curve has not intersected the market emissions permit price of CO 2 (market permit price = P = λ). Thus, given the market price of CO 2 allowances, Germany has potential to profit if it abates more emissions than required.
On the right side is the MAC curve for Sweden. R Req is the amount of required reductions for Sweden, but the MAC S curve already intersects the market price of CO 2 permits before R Req has been reached. Thus, given the market price of CO 2 permits, Sweden has potential to make a cost saving if it abates fewer emissions than required internally, and instead abates them elsewhere.
In this example, Sweden would abate emissions until its MAC S intersects with P (at R*), but this would only reduce a fraction of Sweden’s total required abatement.
After that it could buy emissions credits from Germany for the price P (per unit). The internal cost of Sweden’s own abatement, combined with the permits it buys in the market from Germany, adds up to the total required reductions (R Req ) for Sweden. Thus Sweden can make a saving from buying permits in the market (Δ d-e-f). This represents the “Gains from Trade”, the amount of additional expense that Sweden would otherwise have to spend if it abated all of its required emissions by itself without trading.
Germany made a profit on its additional emissions abatement, above what was required: it met the regulations by abating all of the emissions that was required of it (R Req ). Additionally, Germany sold its surplus permits to Sweden, and was paid P for every unit it abated, while spending less than P . Its total revenue is the area of the graph (R Req 1 2 R*), its total abatement cost is area (R Req 3 2 R*), and so its net benefit from selling emission permits is the area (Δ 1-2-3) i. e. Gains from Trade.
The two R* (on both graphs) represent the efficient allocations that arise from trading.
Germany: sold (R* – R Req ) emission permits to Sweden at a unit price P . Sweden bought emission permits from Germany at a unit price P .
If the total cost for reducing a particular amount of emissions in the Command Control scenario is called X , then to reduce the same amount of combined pollution in Sweden and Germany, the total abatement cost would be less in the Emissions Trading scenario i. e. (X — Δ 123 – Δ def).
The example above applies not just at the national level: it applies just as well between two companies in different countries, or between two subsidiaries within the same company.
Applying the economic theory[edit]
The nature of the pollutant plays a very important role when policy-makers decide which framework should be used to control pollution.
CO 2 acts globally, thus its impact on the environment is generally similar wherever in the globe it is released. So the location of the originator of the emissions does not really matter from an environmental standpoint. [42]
The policy framework should be different for regional pollutants [43] (e. g. SO 2 and NO x , and also mercury) because the impact exerted by these pollutants may not be the same in all locations. The same amount of a regional pollutant can exert a very high impact in some locations and a low impact in other locations, so it does actually matter where the pollutant is released. This is known as the Hot Spot problem.
A Lagrange framework is commonly used to determine the least cost of achieving an objective, in this case the total reduction in emissions required in a year. In some cases it is possible to use the Lagrange optimization framework to determine the required reductions for each country (based on their MAC) so that the total cost of reduction is minimized. In such a scenario, the Lagrange multiplierrepresents the market allowance price (P) of a pollutant, such as the current market price of emission permits in Europe and the USA. [44]
Countries face the permit market price that exists in the market that day, so they are able to make individual decisions that would minimize their costs while at the same time achieving regulatory compliance. This is also another version of the Equi-Marginal Principle, commonly used in economics to choose the most economically efficient decision.
Prices versus quantities, and the safety valve[edit]
There has been longstanding debate on the relative merits of price versus quantity instruments to achieve emission reductions. [45]
An emission cap and permit trading system is a quantity instrument because it fixes the overall emission level (quantity) and allows the price to vary. Uncertainty in future supply and demand conditions (market volatility) coupled with a fixed number of pollution permits creates an uncertainty in the future price of pollution permits, and the industry must accordingly bear the cost of adapting to these volatile market conditions. The burden of a volatile market thus lies with the industry rather than the controlling agency, which is generally more efficient. However, under volatile market conditions, the ability of the controlling agency to alter the caps will translate into an ability to pick “winners and losers” and thus presents an opportunity for corruption.
In contrast, an emission tax is a price instrument because it fixes the price while the emission level is allowed to vary according to economic activity. A major drawback of an emission tax is that the environmental outcome (e. g. a limit on the amount of emissions) is not guaranteed. On one hand, a tax will remove capital from the industry, suppressing possibly useful economic activity, but conversely, the polluter will not need to hedge as much against future uncertainty since the amount of tax will track with profits. The burden of a volatile market will be borne by the controlling (taxing) agency rather than the industry itself, which is generally less efficient. An advantage is that, given a uniform tax rate and a volatile market, the taxing entity will not be in a position to pick “winners and losers” and the opportunity for corruption will be less.
Assuming no corruption and assuming that the controlling agency and the industry are equally efficient at adapting to volatile market conditions, the best choice depends on the sensitivity of the costs of emission reduction, compared to the sensitivity of the benefits (i. e., climate damage avoided by a reduction) when the level of emission control is varied.
Because there is high uncertainty in the compliance costs of firms, some argue that the optimum choice is the price mechanism. However, the burden of uncertainty cannot be eliminated, and in this case it is shifted to the taxing agency itself.
Some scientists have warned of a threshold in atmospheric concentrations of carbon dioxide beyond which a run-away warming effect could take place, with a large possibility of causing irreversible damage. If this is a conceivable risk then a quantity instrument could be a better choice because the quantity of emissions may be capped with a higher degree of certainty. However, this may not be true if this risk exists but cannot be attached to a known level of GHG concentration or a known emission pathway. [46]
A third option, known as a safety valve , is a hybrid of the price and quantity instruments. The system is essentially an emission cap and permit trading system but the maximum (or minimum) permit price is capped. Emitters have the choice of either obtaining permits in the marketplace or purchasing them from the government at a specified trigger price (which could be adjusted over time). The system is sometimes recommended as a way of overcoming the fundamental disadvantages of both systems by giving governments the flexibility to adjust the system as new information comes to light. It can be shown that by setting the trigger price high enough, or the number of permits low enough, the safety valve can be used to mimic either a pure quantity or pure price mechanism. [47]
All three methods are being used as policy instruments to control greenhouse gas emissions: the EU-ETS is a quantity system using the cap and trading system to meet targets set by National Allocation Plans; Denmark has a price system using a carbon tax (World Bank, 2010, p. 218), [48] while China uses the CO 2 market price for funding of its Clean Development Mechanism projects, but imposes a safety valve of a minimum price per tonne of CO 2 .
Carbon leakage[edit]
Carbon leakage is the effect that regulation of emissions in one country/sector has on the emissions in other countries/sectors that are not subject to the same regulation (Barker et al. , 2007). [49] There is no consensus over the magnitude of long-term carbon leakage (Goldemberg et al. , 1996, p. 31). [50]
In the Kyoto Protocol, Annex I countries are subject to caps on emissions, but non-Annex I countries are not. Barker et al. . (2007) assessed the literature on leakage. The leakage rate is defined as the increase in CO 2 emissions outside of the countries taking domestic mitigation action, divided by the reduction in emissions of countries taking domestic mitigation action. Accordingly, a leakage rate greater than 100% would mean that domestic actions to reduce emissions had had the effect of increasing emissions in other countries to a greater extent, i. e., domestic mitigation action had actually led to an increase in global emissions.
Estimates of leakage rates for action under the Kyoto Protocol ranged from 5 to 20% as a result of a loss in price competitiveness, but these leakage rates were viewed as being very uncertain. [51] For energy-intensive industries, the beneficial effects of Annex I actions through technological development were viewed as possibly being substantial. This beneficial effect, however, had not been reliably quantified. On the empirical evidence they assessed, Barker et al. (2007) concluded that the competitive losses of then-current mitigation actions, e. g., the EU ETS, were not significant.
One of the controversies about carbon mitigation policy thus arises about how to “level the playing field” with border adjustments. [52] One component of the American Clean Energy and Security Act, for example, along with several other energy bills put before Congress, calls for carbon surcharges on goods imported from countries without cap-and-trade programs. Even aside from issues of compliance with the General Agreement on Tariffs and Trade, such border adjustments presume that the producing countries bear responsibility for the carbon emissions.
A general perception among developing countries is that discussion of climate change in trade negotiations could lead to “green protectionism” by high-income countries (World Bank, 2010, p. 251). [48] Tariffs on imports (“virtual carbon”) consistent with a carbon price of $50 per ton of CO 2 could be significant for developing countries. World Bank (2010) commented that introducing border tariffs could lead to a proliferation of trade measures where the competitive playing field is viewed as being uneven. Tariffs could also be a burden on low-income countries that have contributed very little to the problem of climate change.
Trading systems[edit]
Kyoto Protocol[edit]
As the Intergovernmental Panel on Climate Change (IPCC) reports came in over the years, they shed abundant light on the true state of global warming and they gave support to the environmental effort to address this unprecedented problem. However, the same discussions that started decades back had never ceased and the crusade for a tangible solution to global climate change had gone on all the while. In 1997 the Kyoto Protocol was adopted. The Kyoto Protocol is a 1997 international treaty that came into force in 2005. In the treaty, most developed nations agreed to legally binding targets for their emissions of the six major greenhouse gases. [53] Emission quotas (known as “Assigned amounts”) were agreed by each participating ‘Annex I’ country, with the intention of reducing the overall emissions by 5.2% from their 1990 levels by the end of 2012. The United States is the only industrialized nation under Annex I that has not ratified the treaty, and is therefore not bound by it. The IPCC has projected that the financial effect of compliance through trading within the Kyoto commitment period will be limited at between 0.1-1.1% of GDP among trading countries. [54]
The Protocol defines several mechanisms (“flexible mechanisms“) that are designed to allow Annex I countries to meet their emission reduction commitments (caps) with reduced economic impact (IPCC, 2007). [55]
Under Article 3.3 of the Kyoto Protocol, Annex I Parties may use GHG removals, from afforestation and reforestation (forest sinks) and deforestation (sources) since 1990, to meet their emission reduction commitments. [56]
Annex I Parties may also use International Emissions Trading (IET). Under the treaty, for the 5-year compliance period from 2008 until 2012, [57] nations that emit less than their quota will be able to sellassigned amount units to nations that exceed their quotas. [58] It is also possible for Annex I countries to sponsor carbon projects that reduce greenhouse gas emissions in other countries. These projects generate tradable carbon credits that can be used by Annex I countries in meeting their caps. The project-based Kyoto Mechanisms are the Clean Development Mechanism (CDM) and Joint Implementation(JI).
The CDM covers projects taking place in non-Annex I countries, while JI covers projects taking place in Annex I countries. CDM projects are supposed to contribute to sustainable development in developing countries, and also generate “real” and “additional” emission savings, i. e., savings that only occur thanks to the CDM project in question (Carbon Trust, 2009, p. 14). [59] Whether or not these emission savings are genuine is, however, difficult to prove (World Bank, 2010, pp. 265–267). [48]
Australia[edit]
In 2003 the New South Wales (NSW) state government unilaterally established the NSW Greenhouse Gas Abatement Scheme [60] to reduce emissions by requiring electricity generators and large consumers to purchase NSW Greenhouse Abatement Certificates (NGACs). This has prompted the rollout of free energy-efficient compact fluorescent lightbulbs and other energy-efficiency measures, funded by the credits. This scheme has been criticised by the Centre for Energy and Environmental Markets (CEEM) of the UNSW because of its lack of effectiveness in reducing emissions, its lack of transparency and its lack of verification of the additionality of emission reductions. [61]
Both the incumbent Howard Coalition government and the Rudd Labor opposition promised to implement an emissions trading scheme (ETS) before the 2007 federal election. Labor won the election, with the new government proceeding to implement an ETS. The government introduced the Carbon Pollution Reduction Scheme, which the Liberals supported with Malcolm Turnbull as leader. Tony Abbott questioned an ETS, saying the best way to reduce emissions is with a “simple tax”. [62] Shortly before the carbon vote, Abbott defeated Turnbull in a leadership challenge, and from there on the Liberals opposed the ETS. This left the government unable to secure passage of the bill and it was subsequently withdrawn.
Julia Gillard defeated Rudd in a leadership challenge and from there on said no carbon tax would be introduced under a government she led when taking the government to the 2010 election. In the first hung parliament result in 70 years, the government required the support of crossbenchers including the Greens. One requirement for Green support was a carbon tax, which Gillard proceeded with in forming a minority government. A fixed-price carbon tax would proceed to a floating-price ETS within a few years under the plans. The government proposed the Clean Energy Bill in February 2011, [63] which the opposition claimed to be a broken election promise. [64] The Liberal Party vowed to overturn the bill if it is elected. [65]
The bill was passed by the Lower House in October 2011 [66] and the Upper House in November 2011. [67]
New Zealand[edit]
The New Zealand Emissions Trading Scheme (NZ ETS) is a partial-coverage all-free allocation uncapped highly internationally linked emissions trading scheme. The NZ ETS was first legislated in the Climate Change Response (Emissions Trading) Amendment Act 2008 in September 2008 under the Fifth Labour Government of New Zealand [68] [69] and then amended in November 2009 [70] and in November 2012 [71] by the Fifth National Government of New Zealand.
The NZ ETS covers forestry (a net sink), energy (43.4% of total 2010 emissions), industry (6.7% of total 2010 emissions) and waste (2.8% of total 2010 emissions) but not pastoral agriculture (47% of 2010 total emissions). [72] Participants in the NZ ETS must surrender one emission unit (either an international ‘Kyoto’ unit or a New Zealand-issued unit) for every two tonnes of carbon dioxide equivalent emissions reported or they may choose to buy NZ units from the government at a fixed price of NZ$25. [73]
Individual sectors of the economy have different entry dates when their obligations to report emissions and surrender emission units take effect. Forestry, which contributed net removals of 17.5 Mts of CO 2 ein 2010 (19% of NZ’s 2008 emissions, [74] ) entered the NZ ETS on 1 January 2008. [75] The stationary energy, industrial processes and luid fossil fuel sectors entered the NZ ETS on 1 July 2010. The waste sector (landfill operators) will enter on 1 January 2013. [76] Methane and nitrous oxide emissions from pastoral agriculture are not included in the NZ ETS. (From November 2009, agriculture was to enter the NZ ETS on 1 January 2015 [73] )
The NZ ETS is highly linked to international carbon markets as it allows the importing of most of the Kyoto Protocol emission units. It also creates a specific domestic unit; the ‘New Zealand Unit’ (NZU), which will be issued by free allocation to emitters, with no auctions intended in the short term. [77] Free allocation of NZUs will vary by sector. The commercial fishery sector (who are not participants) will receive a free allocation of units on a historic basis. [73] Owners of pre-1990 forests will receive a fixed free allocation of units. [75] Free allocation to emissions-intensive industry, [78] [79] will be provided on an output-intensity basis. For this sector, there is no set limit on the number of units that may be allocated. [80] The number of units allocated to eligible emitters will be based on the average emissions per unit of output within a defined ‘activity’. [81] Bertram and Terry (2010, p 16) state that as the NZ ETS does not ‘cap’ emissions, the NZ ETS is not a cap and trade scheme as understood in the economics literature. [82]
Some stakeholders have criticized the New Zealand Emissions Trading Scheme for its generous free allocations of emission units and the lack of a carbon price signal (the Parliamentary Commissioner for the Environment), [83] and for being ineffective in reducing emissions (Greenpeace Aotearoa New Zealand). [84]
The NZ ETS was reviewed in late 2011 by an independent panel, which reported to the public in September 2011. [85]
European Union[edit]
O Esquema de Comércio de Emissões da União Européia (EU ETS) é o maior esquema multinacional de comércio de emissões de gases de efeito estufa no mundo. It is one of the EU’s central policy instruments to meet their cap set in the Kyoto Protocol (Jones et al. ., 2007, p. 64). [86]
After voluntary trials in the UK and Denmark, Phase I commenced operation in January 2005 with all 15 member states of the European Union participating. [87] The program caps the amount of carbon dioxide that can be emitted from large installations with a net heat supply in excess of 20 MW, such as power plants and carbon intensive factories [88] and covers almost half (46%) of the EU’s Carbon Dioxide emissions. [89] Phase I permits participants to trade amongst themselves and in validated credits from the developing world through Kyoto’s Clean Development Mechanism.
During Phases I and II, allowances for emissions have typically been given free to firms, which has resulted in them getting windfall profits (CCC, 2008, p. 149). [90] Ellerman and Buchner (2008) (referenced by Grubb et al. ., 2009, p. 11) suggested that during its first two years in operation, the EU ETS turned an expected increase in emissions of 1-2 percent per year into a small absolute decline. [91] Grubb et al. . (2009, p. 11) suggested that a reasonable estimate for the emissions cut achieved during its first two years of operation was 50-100 MtCO 2 per year, or 2.5-5 percent.
A number of design flaws have limited the effectiveness of scheme (Jones et al. ., 2007, p. 64). In the initial 2005-07 period, emission caps were not tight enough to drive a significant reduction in emissions (CCC, 2008, p. 149). The total allocation of allowances turned out to exceed actual emissions. This drove the carbon price down to zero in 2007. This oversupply was caused because the allocation of allowances by the EU was based on emissions data from the European Environmental Agency in Copenhagen, which uses a horizontal activity based emissions definition similar to the United Nations, the EU ETS Transaction log in Brussels however uses a vertical installation based emissions measurement system. This caused an oversupply of 200 million tonnes (10% of market) in the EU ETS in the first phase and collapsing prices. [92]
Phase II saw some tightening, but the use of JI and CDM offsets was allowed, with the result that no reductions in the EU will be required to meet the Phase II cap (CCC, 2008, pp. 145, 149). For Phase II, the cap is expected to result in an emissions reduction in 2010 of about 2.4% compared to expected emissions without the cap (business-as-usual emissions) (Jones et al. ., 2007, p. 64). For Phase III (2013–20), the European Commission has proposed a number of changes, including:
the setting of an overall EU cap, with allowances then allocated to EU members; tighter limits on the use of offsets; unlimited banking of allowances between Phases II and III; and a move from allowances to auctioning.
In January 2008, Norway, Iceland, and Liechtenstein joined the European Union Emissions Trading System (EU ETS), according to a publication from the European Commission. [93] The Norwegian Ministry of the Environment has also released its draft National Allocation Plan which provides a carbon cap-and-trade of 15 million metric tonnes of CO 2 , 8 million of which are set to be auctioned. [94] [ citation needed ] According to the OECD Economic Survey of Norway 2010, the nation “has announced a target for 2008-12 10% below its commitment under the Kyoto Protocol and a 30% cut compared with 1990 by 2020.” [95]
Tokyo, Japan[edit]
The Japanese city of Tokyo is like a country in its own right in terms of its energy consumption and GDP. Tokyo consumes as much energy as “entire countries in Northern Europe, and its production matches the GNP of the world’s 16th largest country”. [96] Originally, Japan had a voluntary emissions reductions system that had been in place for some years, but was not effective. [97] Japan has its own emission reduction policy but not a nationwide cap and trade program. This climate strategy is enforced and overseen by the Tokyo Metropolitan Government (TMG). [98] The first phase, which is alike to Japan’s scheme, runs up to 2015, these organizations will have to cut their carbon emissions by 6% or 8% (depending on the type of organization); those who fail to operate within their emission caps will from 2011 on be required to purchase emission allowances to cover any excess emissions, or alternatively, invest in renewable energy certificates or offset credits issued by smaller businesses or branch offices. [99] Firms whom fail to comply will face fines of up to 500,000 yen plus an amount of credits to equal the emissions 1.3 times the amount they failed to reduce during the first phase of the scheme. [100] The long term aim is to cut the metropolis’ carbon emissions by 25% from 2000 levels by 2020. [99]
United States[edit]
An early example of an emission trading system has been the SO 2 trading system under the framework of the Acid Rain Program of the 1990 Clean Air Act in the U. S. Under the program, which is essentially a cap-and-trade emissions trading system, SO 2 emissions were reduced by 50% from 1980 levels by 2007. [101] Some experts argue that the cap-and-trade system of SO 2 emissions reduction has reduced the cost of controlling acid rain by as much as 80% versus source-by-source reduction. [12] [102] The SO 2 program was challenged in 2004, which set in motion a series of events that led to the 2011 Cross-State Air Pollution Rule (CSAPR). Under the CSAPR, the national SO 2 trading program with four separate trading groups for SO 2 and NO x . [103]
In 1997, the State of Illinois adopted a trading program for volatile organic compounds in most of the Chicago area, called the Emissions Reduction Market System. [104] Beginning in 2000, over 100 major sources of pollution in eight Illinois counties began trading pollution credits.
In 2003, New York State proposed and attained commitments from nine Northeast states to form a cap-and-trade carbon dioxide emissions program for power generators, called the Regional Greenhouse Gas Initiative (RGGI). This program launched on January 1, 2009 with the aim to reduce the carbon “budget” of each state’s electricity generation sector to 10% below their 2009 allowances by 2018. [105]
Also in 2003, U. S. corporations were able to trade CO 2 emission allowances on the Chicago Climate Exchange under a voluntary scheme. In August 2007, the Exchange announced a mechanism to createemission offsets for projects within the United States that cleanly destroy ozone-depleting substances. [106]
Also in 2003, the Environmental Protection Agency (EPA) began to administer the NOx Budget Trading Program (NBP)under the NOx State Implementation Plan (also known as the “NOx SIP Call”) The NOx Budget Trading Program was a market-based cap and trade program created to reduce emissions of nitrogen oxides (NO x ) from power plants and other large combustion sources in the eastern United States. NO x is a prime ingredient in the formation of ground-level ozone (smog), a pervasive air pollution problem in many areas of the eastern United States. The NBP was designed to reduce NO x emissions during the warm summer months, referred to as the ozone season, when ground-level ozone concentrations are highest. In March 2008, EPA again strengthened the 8-hour ozone standard to 0.075 parts per million (ppm) from its previous 0.008 ppm. [107]
In 2006, the California Legislature passed the California Global Warming Solutions Act, AB-32, which was signed into law by Governor Arnold Schwarzenegger. Thus far, flexible mechanisms in the form of project based offsets have been suggested for three main project types. The project types include: manure management, forestry, and destruction of ozone-depleted substances. However, a recent ruling from Judge Ernest H. Goldsmith of San Francisco’s Superior Court states that the rules governing California’s cap-and-trade system were adopted without a proper analysis of alternative methods to reduce greenhouse gas emissions. [108] The tentative ruling, issued on January 24, 2011, argues that the California Air Resources Board violated state environmental law by failing to consider such alternatives. If the decision is made final, the state would not be allowed to implement its proposed cap-and-trade system until the California Air Resources Board fully complies with the California Environmental Quality Act. [109]
Since February 2007, seven U. S. states and four Canadian provinces have joined together to create the Western Climate Initiative (WCI),a regional greenhouse gas emissions trading system. [110] July 2010, a meeting took place to further outline the cap-and-trade system which if accepted would curb greenhouse gas emissions by January 2012. [111]
On November 17, 2008 President-elect Barack Obama clarified, in a talk recorded for YouTube, his intentions for the US to enter a cap-and-trade system to limit global warming. [112]
The 2010 United States federal budget proposes to support clean energy development with a 10-year investment of US $15 billion per year, generated from the sale of greenhouse gas (GHG) emissions credits. Under the proposed cap-and-trade program, all GHG emissions credits would be auctioned off, generating an estimated $78.7 billion in additional revenue in FY 2012, steadily increasing to $83 billion by FY 2019. [113]
The American Clean Energy and Security Act (H. R. 2454), a greenhouse gas cap-and-trade bill, was passed on June 26, 2009, in the House of Representatives by a vote of 219-212. The bill originated in the House Energy and Commerce Committee and was introduced by Representatives Henry A. Waxman and Edward J. Markey. [114] Although cap and trade also gained a significant foothold in the Senate via the efforts of Republican Lindsey Graham, Independent Democrat Joe Lieberman, and Democrat John Kerry, [115] the legislation was ultimately abandoned due to a confluence of political factors. [116]
Renewable energy certificates[edit]
Renewable Energy Certificates (occasionally referred to as or “green tags” [citation required]), are a largely unrelated form of market-based instruments that are used to achieve renewable energy targets, which may be environmentally motivated (like emissions reduction targets), but may also be motivated by other aims, such as energy security or industrial policy. [Recommend cutting here and relocating the remaining discussion below to a separate Wiki entry.]
[to be relocated] RECs are typically created as transferable rights for renewable energy in use within some American states, across various European countries, including the UK, Sweden, Norway, and Poland, and in Asia (India, for example). A renewable energy provider gets issued one green tag for each 1,000 kWh of energy it produces. The energy is sold on the wholesale electricity market, and the certificates can be sold separately, or bundled with the electricity. RECs are purchased by firms or individuals in order to identify a portion of their energy as coming from renewable sources.
They may be used like an offsetting scheme or to show corporate responsibility. In some jurisdictions their issuance is unregulated, with no formal registry to ensure there is no double-counting. More often, however, REC policies are established by governments who set formal mandatory targets for electricity suppliers or other regulated entities.
Carbon market[edit]
Carbon emissions trading is emissions trading specifically for carbon dioxide (calculated in tonnes of carbon dioxide equivalent or tCO 2 e) and currently makes up the bulk of emissions trading. It is one of the ways countries can meet their obligations under the Kyoto Protocol to reduce carbon emissions and thereby mitigate global warming.
Market trend[edit]
Carbon emissions trading has been steadily increasing in recent years. According to the World Bank‘s Carbon Finance Unit, 374 million metric tonnes of carbon dioxide equivalent (tCO 2 e) were exchanged through projects in 2005, a 240% increase relative to 2004 (110 mtCO 2 e) [117] which was itself a 41% increase relative to 2003 (78 mtCO 2 e). [118]
In terms of dollars, the World Bank has estimated that the size of the carbon market was 11 billion USD in 2005, 30 billion USD in 2006, [117] and 64 billion in 2007. [119]
The Marrakesh Accords of the Kyoto protocol defined the international trading mechanisms and registries needed to support trading between countries, with allowance trading now occurring between European countries and Asian countries. However, while the USA as a nation did not ratify the Protocol, many of its states are now developing cap-and-trade systems and are looking at ways to link their emissions trading systems together, nationally and internationally, to seek out the lowest costs and improve luidity of the market. [120] However, these states also wish to preserve their individual integrity and unue features. For example, in contrast to the other Kyoto-compliant systems, some states propose other types of greenhouse gas sources, different measurement methods, setting a maximum on the price of allowances, or restricting access to CDM projects. Creating instruments that are not truly fungible would introduce instability and make pricing difficult. Various proposals are being investigated to see how these systems might be linked across markets, with the International Carbon Action Partnership (ICAP) as an international body to help co-ordinate this. [120] [121]
Business reaction[edit]
In 2008, Barclays Capital predicted that the new carbon market would be worth $70 billion worldwide that year. [122] The voluntary offset market, by comparison, is projected to grow to about $4bn by 2010. [123]
23 multinational corporations came together in the G8 Climate Change Roundtable, a business group formed at the January 2005 World Economic Forum. The group included Ford, Toyota, British Airways, BP and Unilever. On June 9, 2005 the Group published a statement stating that there was a need to act on climate change and stressing the importance of market-based solutions. It called on governments to establish “clear, transparent, and consistent price signals” through “creation of a long-term policy framework” that would include all major producers of greenhouse gases. [124] By December 2007 this had grown to encompass 150 global businesses. [125]
Business in the UK have come out strongly in support of emissions trading as a key tool to mitigate climate change, supported by NGOs. [126] However, not all businesses favor a trading approach. On December 11, 2008, Rex Tillerson, the CEO of Exxonmobil, said a carbon tax is “a more direct, more transparent and more effective approach” than a cap-and-trade program, which he said, “inevitably introduces unnecessary cost and complexity”. He also said that he hoped that the revenues from a carbon tax would be used to lower other taxes so as to be revenue neutral. [127]
The International Air Transport Association, whose 230 member airlines comprise 93% of all international traffic, position is that trading should be based on “benchmarking,” setting emissions levels based on industry averages, rather than “grandfathering,” which would use individual companies’ previous emissions levels to set their future permit allowances. They argue grandfathering “would penalise airlines that took early action to modernise their fleets, while a benchmarking approach, if designed properly, would reward more efficient operations”. [128]
Measuring, reporting, verification (MRV)[edit]
An emissions trading system requires measurements at the level of operator or installation. These measurements are then reported to a regulator. For greenhouse gases all trading countries maintain an inventory of emissions at national and installation level; in addition, the trading groups within North America maintain inventories at the state level through The Climate Registry. For trading between regions these inventories must be consistent, with equivalent units and measurement technues. [129]
In some industrial processes emissions can be physically measured by inserting sensors and flowmeters in chimneys and stacks, but many types of activity rely on theoretical calculations for measurement. Depending on local legislation, these measurements may require additional checks and verification by government or third party auditors, prior or post submission to the local regulator.
Enforcement[edit]
Another significant, yet troublesome aspect is enforcement. [130] Without effective MRV and enforcement the value of allowances is diminished. Enforcement can be done using several means, including finesor sanctioning those that have exceeded their allowances. Concerns include the cost of MRV and enforcement and the risk that facilities may be tempted to mislead rather than make real reductions or make up their shortfall by purchasing allowances or offsets from another entity. The net effect of a corrupt reporting system or poorly managed or financed regulator may be a discount on emission costs, and a (hidden) increase in actual emissions.
According to haus (2007, p. 27), strict enforcement of the Kyoto Protocol is likely to be observed in those countries and industries covered by the EU ETS. [131] Ellerman and Buchner (2007, p. 71) commented on the European Commission’s (EC’s) role in enforcing scarcity of permits within the EU ETS. [132] This was done by the EC’s reviewing the total number of permits that member states proposed that their industries be allocated. Based on institutional and enforcement considerations, Kruger et al. (2007, pp. 130–131) suggested that emissions trading within developing countries might not be a realistic goal in the near-term. [133] Burniaux et al. . (2008, p. 56) argued that due to the difficulty in enforcing international rules against sovereign states, development of the carbon market would require negotiation and consensus-building. [134]
Criticism[edit]
Chicago Climate Justice activists protesting cap and trade legislation in front ofChicago Climate Exchange building in Chicago Loop.
Emissions trading has been criticised for a variety of reasons.
In the popular science magazine New Scientist , Lohmann (2006) argued that trading pollution allowances should be avoided as a climate change policy. Lohman gave several reasons for this view. First, global warming will require more radical change than the modest changes driven by previous pollution trading schemes such as the US SO 2 market. Global warming requires “nothing less than a reorganisation of society and technology that will leave most remaining fossil fuels safely underground.” Carbon trading schemes have tended to reward the heaviest polluters with ‘windfall profits’ when they are granted enough carbon credits to match historic production. Carbon trading encourages business-as-usual as expensive long-term structural changes will not be made if there is a cheaper source of carbon credits. Cheap “offset” carbon credits are frequently available from the less developed countries, where they may be generated by local polluters at the expense of local communities. [135]
Lohmann (2006b) supported conventional regulation, green taxes, and energy policies that are “justice-based” and “community-driven.” [136] According to Carbon Trade Watch (2009), carbon trading has had a “disastrous track record.” The effectiveness of the EU ETS was criticized, and it was argued that the CDM had routinely favoured “environmentally ineffective and socially unjust projects.” [137]
Annie Leonard provided a critical view on carbon emissions trading in her 2009 documentary The Story of Cap and Trade . This documentary emphasized three factors: unjust financial advantages to major pollutors resulting from free permits, an ineffectiveness of the system caused by cheating in connection with carbon offsets and a distraction from the search for other solutions. [138]
Offsets[edit]
Forest campaigner Jutta Kill (2006) of European environmental group FERN argued that offsets for emission reductions were no substitute for actual cuts in emissions. Kill stated that “[carbon] in trees is temporary: Trees can easily release carbon into the atmosphere through fire, disease, climatic changes, natural decay and timber harvesting.” [139]
Supply of permits[edit]
Regulatory agencies run the risk of issuing too many emission credits, which can result in a very low price on emission permits (CCC, 2008, p. 140). [90] This reduces the incentive that permit-liable firms have to cut back their emissions. On the other hand, issuing too few permits can result in an excessively high permit price (Hepburn, 2006, p. 239). [140] This is one of the arguments in favour of a hybrid instrument, that has a price-floor, i. e., a minimum permit price, and a price-ceiling, i. e., a limit on the permit price. A price-ceiling (safety value) does, however, remove the certainty of a particular quantity limit of emissions (Bashmakov et al. ., 2001). [141]
Incentives[edit]
Emissions trading can result in perverse incentives. If, for example, polluting firms are given emission permits for free (“grandfathering”), this may create a reason for them not to cut their emissions. This is because a firm making large cuts in emissions would then potentially be granted fewer emission permits in the future (IMF, 2008, pp. 25–26). [142] This perverse incentive can be alleviated if permits are auctioned, i. e., sold to polluters, rather than giving them the permits for free (Hepburn, 2006, pp. 236–237). [140]
On the other hand, allocating permits can be used as a measure to protect domestic firms who are internationally exposed to competition (p. 237). This happens when domestic firms compete against other firms that are not subject to the same regulation. This argument in favour of allocation of permits has been used in the EU ETS, where industries that have been judged to be internationally exposed, e. g., cement and steel production, have been given permits for free (4CMR, 2008). [143]
Auctioning[edit]
The revenues from auctioning go to the government. These revenues could, for example, be used for research and development of sustainable technology. [144] Alternatively, revenues could be used to cutdistortionary taxes, thus improving the efficiency of the overall cap policy (Fisher et al. ., 1996, p. 417). [145]
Distributional effects[edit]
The Congressional Budget Office (CBO, 2009) examined the potential effects of the American Clean Energy and Security Act on US households. [146] This Act relies heavily on the free allocation of permits. The Bill was found to protect low-income consumers, but it was recommended that the Bill be changed to be more efficient. It was suggested that the Bill be changed to reduce welfare provisions for corporations, and more resources be made available for consumer relief.

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Idéias quentes Idéias superiores Novas ideias Categoria Status Meu feedback.
Xnxx vedios.
Trazer de volta o layout antigo com pesquisa de imagens.
sim: a única possibilidade (eu acho) enviar todas as informações para (alienvault.
Desinformação na ordem DVD.
Eu pedi DVD / Blueray "AL. A confidencial" tudo que eu consegui foi Blue ray & amp; um contato # para obter o DVD que não funcionou. Eu encomendo minha semana com Marilyn ____DVD / blue ray & amp; Eu peguei os dois - tolamente, assumi que o mesmo se aplicaria a L. A. ___ETC não. Eu não tenho uma máquina de raio azul ----- Eu não quero uma máquina de raio azul Eu não quero filmes blueray. Como obtenho minha cópia de DVD de L. A. Confidential?
yahoo, pare de bloquear email.
Passados ​​vários meses agora, o Yahoo tem bloqueado um servidor que pára nosso e-mail.
O Yahoo foi contatado pelo dono do servidor e o Yahoo alegou que ele não bloquearia o servidor, mas ainda está sendo bloqueado. CEASE & amp; DESISTIR.
Não consigo usar os idiomas ingleses no e-mail do Yahoo.
Por favor, me dê a sugestão sobre isso.
Motor de busca no Yahoo Finance.
Um conteúdo que está no Yahoo Finance não aparece nos resultados de pesquisa do Yahoo ao pesquisar por título / título da matéria.
Existe uma razão para isso, ou uma maneira de reindexar?
Procure por "turkey ******" imagens sem ser avisado de conteúdo adulto ou que o mostre.
O Yahoo está tão empenhado em atender os gostos lascivos das pessoas que nem posso procurar imagens de uma marca de "peitos de peru" sem ser avisado sobre conteúdo adulto? Apenas usando a palavra "******" em QUALQUER contexto significa que eu vou pegar seios humanos em toda a página e ter que ser avisado - e passar por etapas para evitá-lo?
Aqui está minha sugestão Yahoo:
Invente um programa de computador que reconheça palavras como "câncer" ou "peru" ou "galinha" em uma frase que inclua a palavra "******" e não assuma automaticamente a digitação "***** * "significa que estou procurando por ***********.
Descobrir uma maneira de fazer com que as pessoas que ESTÃO procurando *********** busquem ativamente por si mesmas, sem assumir que o resto de nós deve querer *********** se digitarmos uma palavra comum - ****** - que qualquer um pode ver qualquer dia em qualquer seção de carne em qualquer supermercado em todo o país. :(
O Yahoo está tão empenhado em atender os gostos lascivos das pessoas que nem posso procurar imagens de uma marca de "peitos de peru" sem ser avisado sobre conteúdo adulto? Apenas usando a palavra "******" em QUALQUER contexto significa que eu vou pegar seios humanos em toda a página e ter que ser avisado - e passar por etapas para evitá-lo?
Aqui está minha sugestão Yahoo:
Invente um programa de computador que reconheça palavras como "câncer" ou "peru" ou "galinha" em uma frase que inclua a palavra "******" e não assuma automaticamente a digitação "***** * "significa que estou procurando por mais ...
Por que, quando eu faço login no YahooGroups, todos os grupos aparecem em francês ?!
Quando entro no YahooGroups e ligo para um grupo, de repente tudo começa a aparecer em francês? O que diabos está acontecendo lá ?! Por alguma razão, o sistema está automaticamente me transferindo para o fr. groups. yahoo. Alguma ideia?
consertar o que está quebrado.
Eu não deveria ter que concordar com coisas que eu não concordo com a fim de dizer o que eu acho - eu não tive nenhum problema resolvido desde que comecei a usar o Yahoo - fui forçado a jogar meu antigo mensageiro, trocar senhas, obter novas messenger, disse para usar o meu número de telefone para alertar as pessoas que era o meu código de segurança, receber mensagens diárias sobre o bloqueio de yahoo tentativas de uso (por mim) para quem sabe por que como ele não faz e agora eu obter a nova política aparecer em cada turno - as empresas costumam pagar muito caro pela demografia que os usuários fornecem para você, sem custo, pois não sabem o que você está fazendo - está lá, mas não está bem escrito - e ninguém pode responder a menos que concordem com a política. Já é ruim o suficiente você empilhar o baralho, mas depois não fornece nenhuma opção de lidar com ele - o velho era bom o suficiente - todas essas mudanças para o pod de maré comendo mofos não corta - vou relutantemente estar ativamente olhando - estou cansado do mudanças em cada turno e mesmo aqueles que não funcionam direito, eu posso apreciar o seu negócio, mas o Ameri O homem de negócios pode vender-nos ao licitante mais alto por muito tempo - desejo-lhe boa sorte com sua nova safra de guppies - tente fazer algo realmente construtivo para aqueles a quem você serve - a cauda está abanando o cachorro novamente - isso é como um replay de Washington d c
Eu não deveria ter que concordar com coisas que eu não concordo com a fim de dizer o que eu acho - eu não tive nenhum problema resolvido desde que comecei a usar o Yahoo - fui forçado a jogar meu antigo mensageiro, trocar senhas, obter novas messenger, disse para usar o meu número de telefone para alertar as pessoas que era o meu código de segurança, receber mensagens diárias sobre o bloqueio de yahoo tentativas de uso (por mim) para quem sabe por que isso acontece e agora eu recebo a nova política em cada turno - as empresas costumam pagar muito pela demografia que os usuários fornecem para você ... mais.

Emission trading system wiki

O programa cap-and-trade da Califórnia, lançado em 2013, é uma das principais políticas que o estado está usando para reduzir suas emissões de gases de efeito estufa. O programa da Califórnia é o quarto maior do mundo, seguindo os programas de limite e comércio da União Europeia, da República da Coreia e da província chinesa de Guangdong. Além de gerar reduções de emissões em uma das maiores economias do mundo, o programa da Califórnia oferece experiência crítica na criação e no gerenciamento de um sistema de limitação e comércio de toda a economia.
Espera-se que o sistema de comércio de emissões da Califórnia reduza as emissões de gases de efeito estufa das entidades regulamentadas em mais de 16% entre 2013 e 2020 e 40% até 2030. É um componente central da estratégia mais ampla do estado para reduzir as emissões totais de gases de efeito estufa. Níveis de 1990 até 2020 e 40% abaixo dos níveis de 1990 até 2030.
A regra de limitar e negociar aplica-se a grandes usinas de energia elétrica, grandes instalações industriais e distribuidores de combustível (por exemplo, gás natural e petróleo). Cerca de 450 empresas responsáveis ​​por cerca de 85 por cento do total de emissões de gases de efeito estufa da Califórnia devem cumprir. A Califórnia vinculou seu programa a programas semelhantes nas províncias canadenses de Ontário e Quebec, o que significa que as empresas em uma jurisdição podem usar permissões de emissão (ou compensações) emitidas por uma das outras para fins de conformidade. Isso amplia o número de empresas sob o limite, levando a eficiências econômicas adicionais.
Emissões de Gases de Efeito Estufa da Califórnia por Setor em 2015.
Detalhes do Cap-and-Trade da Califórnia.
O programa da Califórnia representa o primeiro programa multissetorial de limite e comércio na América do Norte. Com base nas lições da Iniciativa Regional de Gases de Efeito Estufa do nordeste (RGGI) e do Esquema de Comércio de Emissões da União Européia (EU ETS), o programa da Califórnia combina elementos de mercado comprovados com suas próprias inovações políticas.
O California Air Resources Board (CARB) implementa e aplica o programa. As regras de cap-and-trade primeiro aplicadas a usinas de energia elétrica e plantas industriais que emitem 25.000 toneladas de dióxido de carbono equivalente por ano ou mais. A partir de 2015, o programa foi estendido para distribuidores de combustível que atendem ao limite de 25.000 toneladas métricas. O limite global de emissões de gases de efeito estufa do programa cai três por cento ao ano de 2015 até 2020, e mais rápido (detalhes ainda a serem determinados) de 2021 a 2030.
As licenças de emissão são distribuídas por uma combinação de alocação gratuita e leilões trimestrais. A parcela de emissões cobertas por permissões gratuitas varia de acordo com a indústria e com a eficiência de cada instalação em relação aos benchmarks da indústria. Esses elementos de política e outros detalhes relevantes do programa cap-and-trade da Califórnia estão resumidos na Tabela 1 abaixo.
Limite de emissões de gases com efeito de estufa da Califórnia e projeções business-as-usual (BAU).
(CO2, CH4, N2O, HFCs, PFCs, SF6), mais NF3 e outros gases fluorados com efeito de estufa.
Distribuidores de petróleo.
Distribuidores de gás natural.
Operadores de instalações industriais.
A alocação gratuita para serviços públicos diminui ao longo do tempo.
Outros subsídios devem ser comprados em leilão ou por meio de negociação.
Eletricidade: Baseado em planos de aquisição de longo prazo.
Gás natural: com base nas vendas de 2011.
Preço mínimo: Começou em US $ 10 em 2012 e aumenta 5% ao ano sobre a inflação.
Preço máximo: As permissões adicionais estão disponíveis para venda quando os preços atingem um limite superior, fixado em US $ 40 em 2012, aumentando 5% ao ano sobre a inflação. A partir de 2021, será estabelecido um teto rígido de preço, e um suprimento ilimitado de permissões estará disponível a esse preço.
As concessionárias de propriedade de investidores devem consignar suas licenças gratuitas para serem vendidas em leilão; deve usar recursos para o benefício do contribuinte.
Informações adicionais, incluindo resultados de leilão, podem ser encontradas aqui.
394,5 M em 2015 (inclui todos os setores cobertos)
334,2 M em 2020.
200,5 M em 2030.
(Veja a Figura 2 abaixo)
Violações dos regulamentos podem resultar em penalidades civis ou criminais. Estatutos de perjúrio se aplicam.
O programa inclui mecanismos para monitorar e impedir a manipulação do mercado.
A regra Clean Air do estado de Washington aceita tolerâncias de programas de fora do estado para a obrigação de conformidade de uma instalação. O Departamento de Ecologia de Washington está trabalhando para identificar quais licenças do mercado de carbono seriam elegíveis, e a Califórnia é uma possibilidade. Se compradores de fora do estado entrassem no mercado para as permissões da Califórnia, isso poderia afetar os preços para as entidades da Califórnia através de uma ligação indireta.
Programa Global de Mudança Climática da Califórnia.
O programa cap-and-trade da Califórnia é apenas um elemento de sua iniciativa mais ampla de mudança climática, conforme autorizado pela Lei de Soluções de Aquecimento Global da Califórnia (AB 32) e pela lei de extensão de 2016 SB 32. AB 32 estabelece um limite de carbono para o estado em 2020 enquanto a SB 32 estabelece um limite estadual para 2030. A AB 32 busca desacelerar a mudança climática por meio de um programa abrangente que reduz as emissões de gases de efeito estufa de praticamente todas as fontes estaduais.
O AB 32 e outras leis estaduais também exigem uma variedade de ações destinadas a reduzir o impacto do estado no clima, como um Padrão de Portfólio Renovável, um Padrão de Combustível de Baixo Carbono e uma variedade de padrões e incentivos de uso e eficiência energética. O programa cap-and-trade da Califórnia atua como um backstop para garantir que sua meta geral de gases de efeito estufa seja atingida, independentemente do desempenho dessas medidas complementares. A Figura 3 mostra os programas que o CARB está implementando para atingir os objetivos de AB 32 e o impacto projetado de cada um deles. Para obter mais informações sobre as ações tomadas pelo CARB em resposta à AB 32, visite a página do Plano de Definição do Âmbito AB 32, com as informações mais recentes do CARB sobre como o estado está atingindo suas metas de redução de gases de efeito estufa.
Reduções Projetadas (em M CO2e) Causadas por AB 32 Medidas até 2020 e Parcela do Total.
Receita do leilão.
Embora um número significativo de licenças de emissão seja alocado livremente no programa da Califórnia, muitas também são vendidas em leilão. O primeiro ano de leilões gerou mais de US $ 525 milhões em receita para o estado. O estado prevê que a receita anual do leilão aumente com o tempo. Um par de leis de 2012 estabeleceu diretrizes sobre como essa receita anual é desembolsada. As duas leis não identificam programas específicos que se beneficiariam da receita, mas fornecem uma estrutura para como o estado investe a receita de cap-and-trade em projetos locais.
A primeira lei, AB 1532, exige que a receita do leilão seja gasta para fins ambientais, com ênfase na melhoria da qualidade do ar. O segundo, o SB 535, exige que pelo menos 25% da receita seja gasta em programas que beneficiam comunidades carentes, que tendem a sofrer desproporcionalmente com a poluição do ar. A Agência de Proteção Ambiental da Califórnia identifica as comunidades desfavorecidas para oportunidades de investimento, enquanto o Departamento de Finanças do estado supervisiona os gastos dessa receita para mitigar os impactos diretos da mudança climática na saúde. A AB 398, que o governador Jerry Brown assinou em 25 de julho de 2017, esclarece ainda mais as prioridades dos investimentos como:
Reduzindo o ar tóxico e os poluentes atmosféricos dos critérios Promovendo o transporte de baixo e zero carbono Agricultura sustentável Florestas saudáveis ​​e ecologização urbana Reduzindo os poluentes climáticos de vida curta Promovendo adaptação e resiliência ao clima Apoiando a pesquisa sobre clima e energia limpa.
Mais informações sobre como os recursos do programa cap-and-trade da Califórnia são usados ​​podem ser encontradas aqui.

O Wiki Completo.
More info on Emissions trading.
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Emissions trading: Wikis.
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Enciclopédia.
Da Wikipédia, a enciclopédia livre.
Emissions trading (also known as cap and trade ) is an administrative approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants.
A central authority (usually a governmental body) sets a limit or cap on the amount of a pollutant that can be emitted. Companies or other groups are issued emission permits and are required to hold an equivalent number of allowances (or credits ) which represent the right to emit a specific amount. The total amount of allowances and credits cannot exceed the cap, limiting total emissions to that level. Companies that need to increase their emission allowance must buy credits from those who pollute less. The transfer of allowances is referred to as a trade. In effect, the buyer is paying a charge for polluting, while the seller is being rewarded for having reduced emissions by more than was needed. Thus, in theory, those who can reduce emissions most cheaply will do so, achieving the pollution reduction at the lowest cost to society. [1]
There are active trading programs in several air pollutants. For greenhouse gases the largest is the European Union Emission Trading Scheme. [ 2 ] In the United States there is a national market to reduce acid rain and several regional markets in nitrogen oxides. [ 3 ] Markets for other pollutants tend to be smaller and more localized.
The overall goal of an emissions trading plan is to minimize the cost of meeting a set emissions target. [ 4 ] The cap is an enforceable limit on emissions that is usually lowered over time — aiming towards a national emissions reduction target. [ 4 ] In other systems a portion of all traded credits must be retired, causing a net reduction in emissions each time a trade occurs. In many cap-and-trade systems, organizations which do not pollute may also participate, thus environmental groups can purchase and retire allowances or credits and hence drive up the price of the remainder according to the law of demand. [ 5 ] Corporations can also prematurely retire allowances by donating them to a nonprofit entity and then be eligible for a tax deduction.
Economists have urged the use of "market-based" instruments such as emissions trading to address environmental problems instead of prescriptive "command and control" regulation. [ 6 ] However, emissions trading requires a cap to effectively reduce emissions, and the cap is a government regulatory mechanism. After a cap has been set by a government political process, individual companies are free to choose how or if they will reduce their emissions. Failure to reduce emissions is often punishable by a further government regulatory mechanism, a fine that increases costs of production. Firms will choose the least-costly way to comply with the pollution regulation, which will lead to reductions where the least expensive solutions exist, while allowing emissions that are more expensive to reduce.
The efficiency of what later was to be called the "cap-and-trade" approach to air pollution abatement was first demonstrated in a series of micro-economic computer simulation studies between 1967 and 1970 for the National Air Pollution Control Administration (predecessor to the United States Environmental Protection Agency's Office of Air and Radiation) by Ellison Burton and William Sanjour. These studies used mathematical models of several cities and their emission sources in order to compare the cost and effectiveness of various control strategies. [ 7 ] [ 8 ] [ 9 ] [ 10 ] [ 11 ] Each abatement strategy was compared with the "least cost solution" produced by a computer optimization program to identify the least costly combination of source reductions in order to achieve a given abatement goal. [ 12 ] In each case it was found that the least cost solution was dramatically less costly than the same amount of pollution reduction produced by any conventional abatement strategy. [ 13 ] This led to the concept of "cap and trade" as a means of achieving the "least cost solution" for a given level of abatement.
The development of emissions trading over the course of its history can be divided into four phases: [ 14 ]
Gestation: Theoretical articulation of the instrument (by Coase, [ 15 ] Crocker, [ 16 ] Dales, [ 17 ] Montgomery [ 18 ] etc.) and, independent of the former, tinkering with "flexible regulation" at the US Environmental Protection Agency. Proof of Principle: First developments towards trading of emission certificates based on the "offset-mechanism" taken up in Clean Air Act in 1977. Prototype: Launching of a first "cap-and-trade" system as part of the US Acid Rain Program in Title IV of the 1990 Clean Air Act, officially announced as a paradigm shift in environmental policy, as prepared by "Project 88", a network-building effort to bring together environmental and industrial interests in the US. Regime formation: branching out from the US clean air policy to global climate policy, and from there to the European Union, along with the expectation of an emerging global carbon market and the formation of the "carbon industry".
Cap and trade versus offsets created through a baseline and credit approach.
The textbook emissions trading program can be called a "cap-and-trade" approach in which an aggregate cap on all sources is established and these sources are then allowed to trade amongst themselves to determine which sources actually emit the total pollution load. An alternative approach with important differences is a baseline and credit program. [ 19 ]
In a baseline and credit program polluters that are not under an aggregate cap can create credits, usually called offsets, by reducing their emissions below a baseline level of emissions. Such credits can be purchased by polluters that do have a regulatory limit. [ 20 ]
Economics of international emissions trading.
It is possible for a country to reduce emissions using a Command-Control approach, such as regulation, direct and indirect taxes. The cost of that approach differs between countries because the Marginal Abatement Cost Curve (MAC) — the cost of eliminating an additional unit of pollution — differs by country. It might cost China $2 to eliminate a ton of CO 2 , but it would probably cost Sweden or the U. S. much more. International emissions-trading markets were created precisely to exploit differing MACs.
Emissions trading through Gains from Trade can be more beneficial for both the buyer and the seller than a simple emissions capping scheme.
Consider two European countries, such as Germany and Sweden. Each can either reduce all the required amount of emissions by itself or it can choose to buy or sell in the market.
For this example let us assume that Germany can abate its CO 2 at a much cheaper cost than Sweden, e. g. MAC S > MAC G where the MAC curve of Sweden is steeper (higher slope) than that of Germany, and R Req is the total amount of emissions that need to be reduced by a country.
On the left side of the graph is the MAC curve for Germany. R Req is the amount of required reductions for Germany, but at R Req the MAC G curve has not intersected the market allowance price of CO 2 (market allowance price = P = λ). Thus, given the market price of CO 2 allowances, Germany has potential to profit if it abates more emissions than required.
On the right side is the MAC curve for Sweden. R Req is the amount of required reductions for Sweden, but the MAC S curve already intersects the market price of CO 2 allowances before R Req has been reached. Thus, given the market allowance price of CO 2 , Sweden has potential to make a cost saving if it abates fewer emissions than required internally, and instead abates them elsewhere.
In this example, Sweden would abate emissions until its MAC S intersects with P (at R*), but this would only reduce a fraction of Sweden’s total required abatement. After that it could buy emissions credits from Germany for the price P (per unit). The internal cost of Sweden’s own abatement, combined with the credits it buys in the market from Germany, adds up to the total required reductions (R Req ) for Sweden. Thus Sweden can make a saving from buying credits in the market (Δ d-e-f). This represents the "Gains from Trade", the amount of additional expense that Sweden would otherwise have to spend if it abated all of its required emissions by itself without trading.
Germany made a profit on its additional emissions abatement, above what was required: it met the regulations by abating all of the emissions that was required of it (R Req ). Additionally, Germany sold its surplus to Sweden as credits, and was paid P for every unit it abated, while spending less than P . Its total revenue is the area of the graph (R Req 1 2 R*), its total abatement cost is area (R Req 3 2 R*), and so its net benefit from selling emission credits is the area (Δ 1-2-3) i. e. Gains from Trade.
The two R* (on both graphs) represent the efficient allocations that arise from trading.
Germany: sold (R* - R Req ) emission credits to Sweden at a unit price P . Sweden bought emission credits from Germany at a unit price P .
If the total cost for reducing a particular amount of emissions in the Command Control scenario is called X , then to reduce the same amount of combined pollution in Sweden and Germany, the total abatement cost would be less in the Emissions Trading scenario i. e. (X — Δ 123 - Δ def).
The example above applies not just at the national level: it applies just as well between two companies in different countries, or between two subsidiaries within the same company.
Applying the economic theory.
The nature of the pollutant plays a very important role when policy-makers decide which framework should be used to control pollution.
CO 2 acts globally, thus its impact on the environment is generally similar wherever in the globe it is released. So the location of the originator of the emissions does not really matter from an environmental standpoint.
The policy framework should be different for regional pollutants [ 21 ] (e. g. SO 2 and NO X , and also mercury) because the impact exerted by these pollutants may not be the same in all locations. The same amount of a regional pollutant can exert a very high impact in some locations and a low impact in other locations, so it does actually matter where the pollutant is released. This is known as the Hot Spot problem.
A Lagrange framework is commonly used to determine the least cost of achieving an objective, in this case the total reduction in emissions required in a year. In some cases it is possible to use the Lagrange optimization framework to determine the required reductions for each country (based on their MAC) so that the total cost of reduction is minimized. In such a scenario, the Lagrange multiplier represents the market allowance price (P) of a pollutant, such as the current market allowance price of emissions in Europe [ 22 ] and the USA. [ 23 ]
All countries face the market allowance price that exists in the market that day, so they are able to make individual decisions that would minimize their costs while at the same time achieving regulatory compliance. This is also another version of the Equi-Marginal Principle, commonly used in economics to choose the most economically efficient decision.
Prices versus quantities, and the safety valve.
There has been longstanding debate on the relative merits of price versus quantity instruments to achieve emission reductions. [ 24 ]
An emission cap and permit trading system is a quantity instrument because it fixes the overall emission level (quantity) and allows the price to vary. Uncertainty in future supply and demand conditions (market volatility) coupled with a fixed number of pollution credits creates an uncertainty in the future price of pollution credits, and the industry must accordingly bear the cost of adapting to these volatile market conditions. The burden of a volatile market thus lies with the industry rather than the controlling agency, which is generally more efficient. However, under volatile market conditions, the ability of the controlling agency to alter the caps will translate into an ability to pick "winners and losers" and thus presents an opportunity for corruption.
In contrast, an emission tax is a price instrument because it fixes the price while the emission level is allowed to vary according to economic activity. A major drawback of an emission tax is that the environmental outcome (e. g. a limit on the amount of emissions) is not guaranteed. On one hand, a tax will remove capital from the industry, suppressing possibly useful economic activity, but conversely, the polluter will not need to hedge as much against future uncertainty since the amount of tax will track with profits. The burden of a volatile market will be borne by the controlling (taxing) agency rather than the industry itself, which is generally less efficient. An advantage is that, given a uniform tax rate and a volatile market, the taxing entity will not be in a position to pick "winners and losers" and the opportunity for corruption will be less.
Assuming no corruption and assuming that the controlling agency and the industry are equally efficient at adapting to volatile market conditions, the best choice depends on the sensitivity of the costs of emission reduction, compared to the sensitivity of the benefits (i. e., climate damages avoided by a reduction) when the level of emission control is varied.
Because there is high uncertainty in the compliance costs of firms, some argue that the optimum choice is the price mechanism. However, the burden of uncertainty cannot be eliminated, and in this case it is shifted to the taxing agency itself.
Some scientists have warned of a threshold in atmospheric concentrations of carbon dioxide beyond which a run-away warming effect could take place, with a large possibility of causing irreversible damages. If this is a conceivable risk then a quantity instrument could be a better choice because the quantity of emissions may be capped with a higher degree of certainty. However, this may not be true if this risk exists but cannot be attached to a known level of GHG concentration or a known emission pathway. [ 25 ]
A third option, known as a safety valve , is a hybrid of the price and quantity instruments. The system is essentially an emission cap and permit trading system but the maximum (or minimum) permit price is capped. Emitters have the choice of either obtaining permits in the marketplace or purchasing them from the government at a specified trigger price (which could be adjusted over time). The system is sometimes recommended as a way of overcoming the fundamental disadvantages of both systems by giving governments the flexibility to adjust the system as new information comes to light. It can be shown that by setting the trigger price high enough, or the number of permits low enough, the safety valve can be used to mimic either a pure quantity or pure price mechanism. [ 26 ]
All three methods are being used as policy instruments to control greenhouse gas emissions: the EU-ETS is a quantity system using the cap and trading system to meet targets set by National Allocation Plans, the UK's Climate Change Levy is a price system using a direct carbon tax, while China uses the CO 2 market price for funding of its Clean Development Mechanism projects, but imposes a safety valve of a minimum price per tonne of CO 2 .
Incomplete country cooperation and border adjustments.
Most economic studies of the costs of reducing carbon emissions assume global participation, [ 27 ] [ 28 ] [ 29 ] [ 30 ] but since the Kyoto Protocol has limited country participation, which is likely to continue in any post-Kyoto agreement, carbon leakage will arise. Direct leakage effects occur when production of a good is shifted to a country not bound to reduce its carbon emissions. Indirect leakage results from the lower world price of petrochemicals, especially oil and coal. Non-participating countries will import more oil and coal, both to fuel the production of energy-intensive exports and goods produced for domestic consumption. [ 31 ] Economic considerations of free riding, expectations, and general equilibrium studies suggest that these effects can be substantial. [ 32 ] One of the controversies about carbon mitigation policy thus arises about how to "level the playing field" with border adjustments. [ 33 ] One component of the American Clean Energy and Security Act, for example, calls for carbon surcharges on goods imported from countries without cap-and-trade programs. Even aside from issues of compliance with the General Agreement on Tariffs and Trade, such border adjustments presume that the producing countries bear responsibility for the carbon emissions. As Wang and Watson [ 34 ] note, however, one quarter of China's carbon emissions are generated in the production of exports, mostly for consumers in developed countries, and a consumption-based cap-and-trade system may be more in accordance with the principles of benefit taxation (see Knut Wicksell).
Sistemas de negociação.
Protocolo de Quioto.
The Kyoto Protocol is a 1997 international treaty which came into force in 2005, which binds most developed nations to a cap-and-trade system for the six major greenhouse gases. [ 35 ] (The United States is the only industrialized nation under Annex I which has not ratified and therefore is not bound by it.) Emission quotas were agreed by each participating country, with the intention of reducing their overall emissions by 5.2% of their 1990 levels by the end of 2012. Under the treaty, for the 5-year compliance period from 2008 until 2012, [ 36 ] nations that emit less than their quota will be able to sell emissions credits to nations that exceed their quota. [ 37 ]
It is also possible for developed countries within the trading scheme to sponsor carbon projects that provide a reduction in greenhouse gas emissions in other countries, as a way of generating tradable carbon credits. The Protocol allows this through Clean Development Mechanism (CDM) and Joint Implementation (JI) projects, in order to provide flexible mechanisms to aid regulated entities in meeting their compliance with their caps. The UNFCCC validates all CDM projects to ensure they create genuine additional savings and that there is no carbon leakage .
The Intergovernmental Panel on Climate Change has projected that the financial effect of compliance through trading within the Kyoto commitment period will be limited at between 0.1-1.1% of GDP among trading countries. [ 38 ] By comparison, the Stern report estimated that the cost of mitigating climate change would be 1 per cent of global GDP and the costs of doing nothing would be five to 20 times higher. [ 39 ]
Garnaut Draft Report.
In 2003 the New South Wales (NSW) state government unilaterally established the NSW Greenhouse Gas Abatement Scheme [ 40 ] to reduce emissions by requiring electricity generators and large consumers to purchase NSW Greenhouse Abatement Certificates (NGACs). This has prompted the rollout of free energy-efficient compact fluorescent lightbulbs and other energy-efficiency measures, funded by the credits. This scheme has been criticised by the Centre for Energy and Environmental Markets (CEEM) of the UNSW because of its lack of effectiveness in reducing emissions, its lack of transparency and its lack of verification of the additionality of emission reductions. [ 41 ]
On 4 June 2007, former Prime Minister John Howard announced an Australian Carbon Trading Scheme to be introduced by 2012, but opposition parties called the plan "too little, too late". [ 42 ] On 24 November 2007 Howard's coalition government lost a general election and was succeeded by the Labor Party, with Kevin Rudd taking over as prime minister. Prime Minister Rudd announced that a cap-and-trade emissions trading scheme would be introduced in 2010, [ 43 ] however this scheme was delayed by a year until mid-2011. [ 44 ]
Australia's Commonwealth, State and Territory Governments commissioned the Garnaut Climate Change Review, a study by Professor Ross Garnaut on the mechanism of a potential emissions trading scheme. Its interim report was released on 21 February 2008. [ 45 ] It recommended an emissions trading scheme that includes transportation but not agriculture, and that emissions permits should be sold competitively and not allocated free to carbon polluters. It recognised that energy prices will increase and that low income families will need to be compensated. It recommended more support for research into low emissions technologies and a new body to oversee such research. It also recognised the need for transition assistance for coal mining areas. [ 46 ]
In response to Garnaut's draft report, the Rudd Labor government issued a Green Paper [ 47 ] on 16 July that described the intended design of the actual trading scheme.
União Européia.
The European Union Emission Trading Scheme (or EU ETS) is the largest multi-national, greenhouse gas emissions trading scheme in the world and was created in conjunction with the Kyoto Protocol.
After voluntary trials in the UK and Denmark, Phase I commenced operation in January 2005 with all 15 (now 25 of the 27) member states of the European Union participating. [ 48 ] The program caps the amount of carbon dioxide that can be emitted from large installations with a net heat supply in excess of 20 MW, such as power plants and carbon intensive factories [ 49 ] and covers almost half (46%) of the EU's Carbon Dioxide emissions. [ 50 ] Phase I permits participants to trade amongst themselves and in validated credits from the developing world through Kyoto's Clean Development Mechanism.
Whilst the first phase (2005–2007) has received much criticism due to oversupply of allowances and the distribution method of allowances (via grandfathering rather than auctioning), Phase II links the ETS to other countries participating in the Kyoto trading system. The European Commission claims that it has been tougher on Member States' Plans for Phase II, dismissing many of them as being too loose again. [ 51 ] However, the use of carbon offsets means that the entirety of the emissions reductions required by the cap in phase 2 could be met outside of the EU itself. [ 52 ]
All EU member states have ratified the Kyoto Protocol, and so the second phase of the EU ETS has been designed to support the Kyoto mechanisms and compliance period. Thus any organisation trading through the ETS should also meet the international trading obligations under Kyoto.
Nova Zelândia.
The New Zealand Emissions Trading Scheme (NZ ETS) is a largely proposed all-sectors all-greenhouse-gases emissions trading scheme first established in September 2008 by the Fifth Labour Government of New Zealand and amended in November 2009 by the Fifth National Government of New Zealand.
The NZ ETS has a number of key design features. It will have no overall cap on emissions as the allocation of free credits to large emitters and agriculture will be on an intensity basis. Free allocation has no firm ending date and may continue indefinitely, subject to growth in production and allocation reviews. The NZ ETS also includes a fixed-price closed-market period, effectively being a carbon tax, until 2013. [ 53 ] [ 54 ] [ 55 ]
Most of the provisions of the NZ ETS have not yet taken effect due to delayed entry dates. Only the forestry sector (a carbon sink equivalent to 32% of 2007 GHG emissions [ 56 ] ) has entered the NZ ETS, from 1 January 2009. As no other sectors with obligations to buy credits have entered the scheme, there is currently almost no domestic market. [ 53 ] Carbon credits have been earned by forestry for carbon sequestration and have been sold internationally. In September 2009, South Island forestry company Ernslaw One sold about 500,000 carbon credits (valued at more than $NZ10 million) to the Norwegian Government. [ 57 ]
The energy sector (43% of 2007 GHG emissions [ 56 ] ) enters the NZ ETS on July 1, 2010 and agriculture (48% of 2007 GHG emissions [ 56 ] ) does not enter until 2015.
New Zealand's independent environmental watchdog, the Parliamentary Commissioner for the Environment, was sufficiently concerned that the NZ ETS would increase and not reduce emissions that she publicly urged politicians three times not to adopt the National Government's amendments of November 2009. She opposed the removal of a firm cap on emissions, the reduction of price incentives to reduce emissions, and the heavy subsidies from taxpayers granted to emissions-intensive industry and agriculture by the intensity-based allocation of free credits. [ 58 ] [ 59 ] [ 60 ]
Two estimates give the cost to taxpayers of the subsidies to emitters at roughly $NZ100 billion over the 80-year phase-out of gifting of permits. [ 61 ] [ 62 ]
Estados Unidos.
An early example of an emission trading system has been the SO 2 trading system under the framework of the Acid Rain Program of the 1990 Clean Air Act in the U. S. Under the program, which is essentially a cap-and-trade emissions trading system, SO 2 emissions were reduced by 50% from 1980 levels by 2007. [ 63 ] Some experts argue that the cap-and-trade system of SO 2 emissions reduction has reduced the cost of controlling acid rain by as much as 80% versus source-by-source reduction. [ 6 ] [ 64 ]
In 1997, the State of Illinois adopted a trading program for volatile organic compounds in most of the Chicago area, called the Emissions Reduction Market System. [ 65 ] Beginning in 2000, over 100 major sources of pollution in eight Illinois counties began trading pollution credits.
In 2003, New York State proposed and attained commitments from nine Northeast states to form a cap-and-trade carbon dioxide emissions program for power generators, called the Regional Greenhouse Gas Initiative (RGGI). This program launched on January 1, 2009 with the aim to reduce the carbon "budget" of each state's electricity generation sector to 10% below their 2009 allowances by 2018. [ 66 ]
Also in 2003, U. S. corporations were able to trade CO 2 emission allowances on the Chicago Climate Exchange under a voluntary scheme. In August 2007, the Exchange announced a mechanism to create emission offsets for projects within the United States that cleanly destroy ozone-depleting substances. [ 67 ]
In 2007, the California Legislature passed the California Global Warming Solutions Act, AB-32, which was signed into law by Governor Arnold Schwarzenegger. Thus far, flexible mechanisms in the form of project based offsets have been suggested for five main project types. A carbon project would create offsets by showing that it has reduced carbon dioxide and equivalent gases. The project types include: manure management, forestry, building energy, SF6, and landfill gas capture.
Since February 2007, seven U. S. states and four Canadian provinces have joined together to create the Western Climate Initiative (WCI), a regional greenhouse gas emissions trading system. [ 68 ]
On November 17, 2008 President-elect Barack Obama clarified, in a talk recorded for YouTube, that the US will enter a cap-and-trade system to limit global warming. [ 69 ]
The 2010 United States federal budget proposes to support clean energy development with a 10-year investment of US $15 billion per year, generated from the sale of greenhouse gas (GHG) emissions credits. Under the proposed cap-and-trade program, all GHG emissions credits would be auctioned off, generating an estimated $78.7 billion in additional revenue in FY 2012, steadily increasing to $83 billion by FY 2019. [ 70 ]
The American Clean Energy and Security Act, a cap-and-trade bill, was passed on June 26, 2009, in the House of Representatives.
Renewable energy certificates.
Renewable Energy Certificates, or "green tags", are transferable rights for renewable energy within some American states. A renewable energy provider gets issued one green tag for each 1,000 kWh of energy it produces. The energy is sold into the electrical grid, and the certificates can be sold on the open market for profit. They are purchased by firms or individuals in order to identify a portion of their energy with renewable sources and are voluntary.
They are typically used like an offsetting scheme or to show corporate responsibility, although their issuance is unregulated, with no national registry to ensure there is no double-counting. However, it is one way that an organization could purchase its energy from a local provider who uses fossil fuels, but back it with a certificate that supports a specific wind or hydro power project.
Carbon market.
Carbon emissions trading is emissions trading specifically for carbon dioxide (calculated in tonnes of carbon dioxide equivalent or tCO 2 e) and currently makes up the bulk of emissions trading. It is one of the ways countries can meet their obligations under the Kyoto Protocol to reduce carbon emissions and thereby mitigate global warming.
Market trend.
Carbon emissions trading has been steadily increasing in recent years. According to the World Bank's Carbon Finance Unit, 374 million metric tonnes of carbon dioxide equivalent (tCO 2 e) were exchanged through projects in 2005, a 240% increase relative to 2004 (110 mtCO 2 e) [ 71 ] which was itself a 41% increase relative to 2003 (78 mtCO 2 e). [ 72 ]
In terms of dollars, Felipe de Jesus Garduño Vazquez uses the World Bank has estimated that the size of the carbon market was 11 billion USD in 2005, 30 billion USD in 2006, [ 71 ] and 64 billion in 2007. [ 73 ]
The Marrakesh Accords of the Kyoto protocol defined the international trading mechanisms and registries needed to support trading between countries, with allowance trading now occurring between European countries and Asian countries. However, while the USA as a nation did not ratify the Protocol, many of its states are now developing cap-and-trade systems and are looking at ways to link their emissions trading systems together, nationally and internationally, to seek out the lowest costs and improve luidity of the market. [ 74 ] However, these states also wish to preserve their individual integrity and unue features. For example, in contrast to the other Kyoto-compliant systems, some states propose other types of greenhouse gas sources, different measurement methods, setting a maximum on the price of allowances, or restricting access to CDM projects. Creating instruments that are not truly fungible would introduce instability and make pricing difficult. Various proposals are being investigated to see how these systems might be linked across markets, with the International Carbon Action Partnership (ICAP) as an international body to help co-ordinate this. [ 75 ] [ 76 ]
Business reaction.
With the creation of a market for mandatory trading of carbon dioxide emissions within the Kyoto Protocol, the London financial marketplace has established itself as the center of the carbon finance market, and is expected to have grown into a market valued at $60 billion in 2007. [ 77 ] The voluntary offset market, by comparison, is projected to grow to about $4bn by 2010. [ 78 ]
23 multinational corporations came together in the G8 Climate Change Roundtable, a business group formed at the January 2005 World Economic Forum. The group included Ford, Toyota, British Airways, BP and Unilever. On June 9, 2005 the Group published a statement stating that there was a need to act on climate change and stressing the importance of market-based solutions. It called on governments to establish "clear, transparent, and consistent price signals" through "creation of a long-term policy framework" that would include all major producers of greenhouse gases. [ 79 ] By December 2007 this had grown to encompass 150 global businesses. [ 80 ]
Business in the UK have come out strongly in support of emissions trading as a key tool to mitigate climate change, supported by NGOs. [ 81 ] However, not all businesses favor a trading approach. On December 11, 2008, Rex Tillerson, the CEO of Exxonmobil, said a carbon tax is "a more direct, more transparent and more effective approach" than a cap-and-trade program, which he said, "inevitably introduces unnecessary cost and complexity". He also said that he hoped that the revenues from a carbon tax would be used to lower other taxes so as to be revenue neutral. [ 82 ]
The International Air Transport Association, whose 230 member airlines comprise 93% of all international traffic, position is that trading should be based on “benchmarking,” setting emissions levels based on industry averages, rather than “grandfathering,” which would use individual companies’ previous emissions levels to set their future permit allowances. They argue grandfathering “would penalise airlines that took early action to modernise their fleets, while a benchmarking approach, if designed properly, would reward more efficient operations". [ 83 ]
Measuring, reporting, verification (MRV)
Meaningful emission reductions within a trading system can only occur if they can be measured at the level of operator or installation and reported to a regulator. There is an open-source tool for helping operators accurately measure and plan their emissions. For greenhouse gases all trading countries maintain an inventory of emissions at national and installation level; in addition, the trading groups within North America maintain inventories at the state level through The Climate Registry. For trading between regions these inventories must be consistent, with equivalent units and measurement technues.
In some industrial processes emissions can be physically measured by inserting sensors and flowmeters in chimneys and stacks, but many types of activity rely on theoretical calculations for measurement. Depending on local legislation, these measurements may require additional checks and verification by government or third party auditors, prior or post submission to the local regulator.
Execução.
Another significant, yet troublesome aspect is enforcement. [ 84 ] Without effective MRV and enforcement the value of allowances are diminished. Enforcement can be done using several means, including fines or sanctioning those that have exceeded their allowances. Concerns include the cost of MRV and enforcement and the risk that facilities may be tempted to mislead rather than make real reductions or make up their shortfall by purchasing allowances or offsets from another entity. The net effect of a corrupt reporting system or poorly managed or financed regulator may be a discount on emission costs, and a (hidden) increase in actual emissions.
Voluntary surrender of units.
An ETS has one distinct advantage in its ability to make deep cuts in carbon emissions - individual participation. Individuals and organisations can strengthen the carbon emission reduction impact of an ETS by voluntarily buying and cancelling carbon credits. [ 85 ] This removes the credits from the carbon market so that they can never be used to emit carbon. Because the number of carbon credits is limited, this means fewer carbon credits remain. That makes the price of the remaining credits higher which helps make low-carbon solutions more economically attractive and helps achieve a Low-carbon economy.
There are a large number of critics of carbon trading as a control mechanism. Critics include environmental justice nongovernmental organizations, [ 86 ] economists, labor organizations and those concerned about energy supply and excessive taxation. Some see carbon trading as a government takeover of the free market. [ 87 ] They argue that trading pollution allowances should be avoided because they result in failures in accounting, dubious science and the destructive impacts of projects upon local peoples and environments. [ 88 ] Instead, they advocate making reductions at the source of pollution and energy policies that are justice-based and community-driven. [ 89 ] Many argue that emissions trading schemes based upon cap and trade will necessarily reduce jobs and incomes. [ 90 ] Most of the criticisms have focused on the carbon market created through investment in Kyoto Mechanisms. Criticism of cap-and-trade emissions trading has generally been more limited to lack of credibility in the first phase of the EU ETS. [ 91 ]
Critics argue that emissions trading does little to solve pollution problems overall, since groups that do not pollute sell their conservation to the highest bidder. Overall reductions would need to come from a sufficient reduction of allowances available in the system.
Regulatory agencies run the risk of issuing too many emission credits, diluting the effectiveness of regulation, and practically removing the cap. In this case, instead of a net reduction in carbon dioxide emissions, beneficiaries of emissions trading simply pollute more. [ citation needed ] The National Allocation Plans by member governments of the European Union Emission Trading Scheme were criticised for this when it became apparent that actual emissions would be less than the government-issued carbon allowances at the end of Phase I of the scheme. Certain emissions trading schemes have been criticised for the practice of grandfathering, where polluters are given free allowances by governments, instead of being made to pay for them. [ 92 ] Critics instead advocate for auctioning the credits. The proceeds could be used for research and development of sustainable technology. [ 93 ] Large free allocations of emission allowances to businesses have been shown to far disproportionally benefit household with higher incomes, thereby increasing economic inequality. [ 94 ]
Critics of carbon trading, such as Carbon Trade Watch, argue that it places disproportionate emphasis on individual lifestyles and carbon footprints, distracting attention from the wider, systemic changes and collective political action that needs to be taken to tackle climate change. [ 87 ] Groups such as the Corner House have argued that the market will choose the easiest means to save a given quantity of carbon in the short term, which may be different to the pathway required to obtain sustained and sizable reductions over a longer period, and so a market-led approach is likely to reinforce technological lock-in. For instance, small cuts may often be achieved cheaply through investment in making a technology more efficient, where larger cuts would require scrapping the technology and using a different one. They also argue that emissions trading is undermining alternative approaches to pollution control with which it does not combine well, and so the overall effect it is having is to actually stall significant change to less polluting technologies.
The corresponding uncertainty under a tax is the level of emissions reductions achieved. [ citation needed ]
The Financial Times published an article about cap-and-trade systems which argued that "Carbon markets create a muddle" and ". leave much room for unverifiable manipulation". [ 95 ] Other critics point out that emissions trading schemes create new uncertainties and risks, which can be commodified by means of derivatives, thereby creating a new speculative market. [ 96 ]
Recent proposals for alternative schemes to avoid the problems of cap-and-trade schemes include Cap and Share, which was being actively considered by the Irish Parliament in May 2008, and the Sky Trust schemes. [ 86 ] These schemes state that cap-and-trade or cap-and-tax schemes inherently impact the poor and those in rural areas, who have less choice in energy consumption options.

Emissions trading.
Da Wikipédia, a enciclopédia livre.
Emissions trading (or emission trading ) is an administrative approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants. It is sometimes called cap and trade .
A central authority (usually a government or international body) sets a limit or cap on the amount of a pollutant that can be emitted. Companies or other groups are issued emission permits and are required to hold an equivalent number of allowances (or credits ) which represent the right to emit a specific amount. The total amount of allowances and credits cannot exceed the cap, limiting total emissions to that level. Companies that need to increase their emission allowance must buy credits from those who pollute less. The transfer of allowances is referred to as a trade. In effect, the buyer is paying a charge for polluting, while the seller is being rewarded for having reduced emissions by more than was needed. Thus, in theory, those that can easily reduce emissions most cheaply will do so, achieving the pollution reduction at the lowest possible cost to society. [1]
There are active trading programs in several pollutants. For greenhouse gases the largest is the European Union Emission Trading Scheme. [ 2 ] In the United States there is a national market to reduce acid rain and several regional markets in nitrogen oxides [ 3 ] Markets for other pollutants tend to be smaller and more localized.
According to some, cap and trade "is inefficient and prone to market failure", and only a carbon tax "allows you to make an international agreement globally effective in a short period of time." [ 4 ] However, a cap and trade system can be politically preferable for existing industries because the initial allocation of allowances is often allocated with a grandfathering provision where rights are issued in proportion to historical emissions. Most of the money from trading is spent on environmental activities, and the investment directed at sustainable projects that earn credits in the developing world which contribute to the Millennium Development Goals. Critics of emissions trading also point to problems of complexity, cost, monitoring, enforcement, and sometimes dispute the initial allocation methods and cap. [ 5 ]
[edit] Overview.
The overall goal of an emissions trading plan is to reduce emissions. The cap is usually lowered over time - aiming towards a national emissions reduction target. In other systems a portion of all traded credits must be retired, causing a net reduction in emissions each time a trade occurs. In many cap and trade systems, organizations which do not pollute may also participate, thus environmental groups can purchase and retire allowances or credits and hence drive up the price of the remainder according to the law of demand. [ 6 ] Corporations can also prematurely retire allowances by donating them to a nonprofit entity and then be eligible for a tax deduction.
Because emissions trading uses markets to determine how to deal with the problem of pollution, it is often touted as an example of effective free market environmentalism. While the cap is usually set by a political process, individual companies are free to choose how or if they will reduce their emissions. In theory, firms will choose the least-costly way to comply with the pollution regulation, creating incentives that reduce the cost of achieving a pollution reduction goal.
[edit] History.
The efficacy of, what later was to be called, the "Cap and Trade" approach to air pollution abatement was first demonstrated in a series of micro-economic computer simulation studies between 1967 and 1970 for the National Air Pollution Control Administration (predecessor to the EPA Air Office) by Ellison Burton and William Sanjour. These studies used mathematical models of several cities and their emission sources in order to compare the cost and effectiveness of various control strategies. [ 7 ] [ 8 ] [ 9 ] [ 10 ] [ 11 ] For each abatement strategy comparison was made with the "least cost solution" produced by a computer optimization program which finds the least costly combination of source reductions to achieve a given abatement goal. [ 12 ] In each case it was found that the least cost solution was dramatically less costly for the same level of pollution produced by any conventional abatement strategy. [ 13 ] This led to the concept of "Cap and Trade" as a means of achieving the "least cost solution" for a given level of abatement.
The development of emissions trading over the course of its history can be divided into four phases: [ 14 ]
Gestation: Theoretical articulation of the instrument (by Coase, Dales, Montgomery etc) and, independent of the former, tinkering with "flexible regulation" at the US Environmental Protection Agency Proof of Principle: First developments towards trading of emission certificates based on the "offset-mechanism" taken up in Clean Air Act in 1977. Prototype: Launching of a first "cap and trade" system as part of US Acid Rain Program, officially announced as a paradigm shift in environmental policy, as prepared by "Project 88", a network building effort to bring together environmental and industrial interests in the US Regime formation: branching out from US clean air policy to global climate policy, and from there to the European Union, along with the expectation of an emerging global carbon market and the formation of the "carbon industry".
[edit] Cap and trade versus baseline and credit.
The textbook emissions trading program can be called a "cap and trade" approach in which an aggregate cap on all sources is established and these sources are then allowed to trade amongst themselves to determine which sources actually emit the total pollution load. An alternative approach with important differences is a baseline and credit program. [ 15 ] In a baseline and credit program a set of polluters that are not under an aggregate cap can create credits by reducing their emissions below a baseline level of emissions. These credits can be purchased by polluters that do have a regulatory limit. Many of the criticisms of trading in general are targeted at baseline and credit programs rather than cap type programs.
[edit] The economics of international emissions trading.
It's possible for a country to reduce emissions using a Command-Control approach, such as regulation, direct and indirect taxes. But that approach is more costly for some countries than for others. That's because the Marginal Abatement Cost (MAC) — the cost of eliminating an additional unit of pollution — differs by country. It might cost China $2 to eliminate a ton of CO 2 , but it would probably cost Sweden or the U. S. much more. International emissions-trading markets were created precisely to exploit differing MACs.
[edit] Example.
Emissions trading can benefit both the buyer and the seller through 'Gains from Trade'.
Consider two European countries, namely Germany and Sweden. Each can either reduce all the required amount of emissions by itself or it can choose to buy or sell in the market.
For this example let us assume that Germany can abate its CO 2 at a much cheaper cost than Sweden, e. g. MAC S > MAC G where the MAC curve of Sweden is steeper (higher slope) than that of Germany, and R Req is the total amount of emissions that need to be reduced by a country.
On the left side of the graph is the MAC curve for Germany. R Req is the amount of required reductions for Germany, but at R Req the MAC G curve has not intersected the market allowance price of CO 2 (market allowance price = P = О»). Thus, given the market price of CO 2 allowances, Germany has potential to profit if it abates more emissions than required.
On the right side is the MAC curve for Sweden. R Req is the amount of required reductions for Sweden, but the MAC S curve already intersects the market price of CO 2 allowances before R Req has been reached. Thus, given the market allowance price of CO 2 , Sweden has potential to profit if it abates fewer emissions than required internally, and instead abates them elsewhere.
In this example Sweden would abate emissions until its MAC S intersects with P (at R*), but this would only reduce a fraction of Sweden’s total required abatement. After that it could buy emissions credits from Germany for the price 'P' (per unit). The internal cost of Sweden’s own abatement, combined with the credits it buys in the market from Germany, adds up to the total required reductions (R Req ) for Sweden. Thus Sweden can also profit from buying credits in the market (О” d-e-f). This represents the вЂ˜Gains from Trade’, the amount of additional expense that Sweden would otherwise have to spend if it abated all of its required emissions by itself without trading.
Germany made a profit by abating more emissions than required: it met the regulations by abating all of the emissions that was required of it (R Req ). Additionally, Germany sold its surplus to Sweden as credits, and was paid 'P' for every unit it abated, while spending less than 'P'. Its total revenue is the area of the graph (R Req 1 2 R*), its total abatement cost is area (R Req 3 2 R*), and so its net benefit from selling emission credits is the area (О” 1-2-3) i. e. Gains from Trade.
The two R* (on both graphs) represent the efficient allocations that arise from trading.
Germany: sold (R* - R Req ) emission credits to Sweden at a unit price 'P'. Sweden bought emission credits from Germany at a unit price 'P'.
If the total cost for reducing a particular amount of emissions in the 'Command Control' scenario is called 'X', then to reduce the same amount of combined pollution in Sweden and Germany, the total abatement cost would be less in the 'Emissions Trading' scenario i. e. (X - О” 123 - О” def).
The example above applies not just at the national level: it applies just as well between two companies in different countries, or between two subsidiaries within the same company.
[edit] Applying the economic theory.
The nature of the pollutant plays a very important role when policy-makers decide which framework should be used to control pollution.
CO 2 acts globally, thus its impact on the environment is generally similar wherever in the globe it is released. So the location of the originator of the emissions does not really matter from an environmental standpoint.
The policy framework should be different for regional pollutants [ 16 ] (e. g. SO 2 and NO X , and also Mercury) because the impact exerted by these pollutants may not be the same in all locations. The same amount of a regional pollutant can exert a very high impact in some locations and a low impact in other locations, so it does actually matter where the pollutant is released. This is known as the 'Hot Spot' problem.
A Lagrange framework is commonly used to determine the least cost of achieving an objective, in this case the total reduction in emissions required in a year. In some cases it is possible to use the Lagrange optimization framework to determine the required reductions for each country (based on their MAC) so that the total cost of reduction is minimized. In such a scenario, the Lagrange Multiplier represents the market allowance price (P) of a pollutant, such as the current market allowance price of emissions in Europe [ 17 ] and the USA. [ 18 ]
All countries face the market allowance price as existent in the market that day, so they are able to make individual decisions that would maximize their profit while at the same time achieving regulatory compliance. This is also another version of the Equi-Marginal Principle, commonly used in economics to choose the most economically efficient decision.
[edit] Prices versus quantities, and the safety valve.
There has been longstanding debate on the relative merits of price versus quantity instruments to achieve emission reductions. [ 19 ]
An emission cap and permit trading system is a quantity instrument because it fixes the overall emission level (quantity) and allows the price to vary. One problem with the cap and trade system is the uncertainty of the cost of compliance as the price of a permit is not known in advance and will vary over time according to market conditions. In contrast, an emission tax is a price instrument because it fixes the price while the emission level is allowed to vary according to economic activity. A major drawback of an emission tax is that the environmental outcome (e. g. a limit on the amount of emissions) is not guaranteed.
The best choice depends on the sensitivity of the costs of emission reduction, compared to the sensitivity of the benefits (i. e., climate damages avoided by a reduction) when the level of emission control is varied.
Because there is high uncertainty in the compliance costs of firms, some argue that the optimum choice is the price mechanism.
However, some scientists have warned of a threshold in atmospheric concentrations of carbon dioxide beyond which a run-away warming effect could take place, with a large possibility of causing irreversible damages. If this is a conceivable risk then a quantity instrument could be a better choice because the quantity of emissions may be capped with a higher degree of certainty. However, this may not be true if this risk exists but cannot be attached to a known level of GHG concentration or a known emission pathway. [ 20 ]
A third option, known as a safety valve , is a hybrid of the price and quantity instruments. The system is essentially an emission cap and tradeable permit system but the maximum (or minimum) permit price is capped. Emitters have the choice of either obtaining permits in the marketplace or purchasing them from the government at a specified trigger price (which could be adjusted over time). The system is sometimes recommended as a way of overcoming the fundamental disadvantages of both systems by giving governments the flexibility to adjust the system as new information comes to light. It can be shown that by setting the trigger price high enough, or the number of permits low enough, the safety valve can be used to mimic either a pure quantity or pure price mechanism. [ 21 ]
All three methods are being used as policy instruments to control greenhouse gas emissions: the EU-ETS is a quantity system using the cap and trading system to meet targets set by National Allocation Plans, the UK's Climate Change Levy is a price system using a direct carbon tax, while China uses the CO 2 market price for funding of its Clean Development Mechanism projects, but imposes a safety valve of a minimum price per tonne of CO 2 .
[edit] Trading systems.
[edit] Kyoto Protocol.
The Kyoto Protocol is a 1997 international treaty which came into force in 2005, which binds most developed nations to a cap and trade system for the six major greenhouse gases. [ 22 ] (The United States is the only industrialized nation under Annex I which has not ratified and therefore is not bound by it.) Emission quotas were agreed by each participating country, with the intention of reducing their overall emissions by 5.2% of their 1990 levels by the end of 2012. Under the treaty, for the 5-year compliance period from 2008 until 2012, [ 23 ] nations that emit less than their quota will be able to sell emissions credits to nations that exceed their quota.
It is also possible for developed countries within the trading scheme to sponsor carbon projects that provide a reduction in greenhouse gas emissions in other countries, as a way of generating tradeable carbon credits. The Protocol allows this through Clean Development Mechanism (CDM) and Joint Implementation (JI) projects, in order to provide flexible mechanisms to aid regulated entities in meeting their compliance with their caps. The UNFCCC validates all CDM projects to ensure they create genuine additional savings and that there is no carbon leakage .
The Intergovernmental Panel on Climate Change has projected that the financial effect of compliance through trading within the Kyoto commitment period will be 'limited' at between 0.1-1.1% of GDP among trading countries. [ 24 ] By comparison the Stern report placed the costs of doing nothing at five to 20 times higher. [ 25 ]
[edit] Australia.
[edit] Garnaut Draft Report.
In 2003 the New South Wales (NSW) state government unilaterally established the NSW Greenhouse Gas Abatement Scheme to reduce emissions by requiring electricity generators and large consumers to purchase NSW Greenhouse Abatement Certificates (NGACs). This has prompted the rollout of free energy-efficient compact fluorescent lightbulbs and other energy-efficiency measures, funded by the credits. This scheme has been criticised by the Centre for Energy and Environmental Markets of the UNSW (CEEM) because of its reliance upon offsets. [ 26 ]
On 4 June 2007, former Prime Minister John Howard announced an Australian Carbon Trading Scheme to be introduced by 2012, but opposition parties called the plan "too little, too late." [ 27 ] On 24 November 2007 Howard's coalition government lost a general election and was succeeded by the Labor Party, with Kevin Rudd taking over as prime minister. Prime Minister Rudd announced that a cap-and-trade emissions trading scheme would be introduced in 2010. [ 28 ]
Australia's Commonwealth, State and Territory Governments commissioned the Garnaut Climate Change Review, a study by Professor Ross Garnaut on the mechanism of a potential emissions trading scheme. Its interim report was released on 21 February 2008. [ 29 ] It recommended an emissions trading scheme that includes transportation but not agriculture, and that emissions permits should be sold competitively and not allocated free to carbon polluters. It recognised that energy prices will increase and that low income families will need to be compensated. It recommended more support for research into low emissions technologies and a new body to oversee such research. It also recognised the need for transition assistance for coal mining areas. [ 30 ]
In response to Garnaut's draft report, the Rudd Labor government issued a Green Paper [ 31 ] on 16 July that described the intended design of the actual trading scheme. Draft legislation will be released in December 2008, to become law in 2009. [ 32 ]
[edit] European Union.
The European Union Emission Trading Scheme (or EU ETS) is the largest multi-national, greenhouse gas emissions trading scheme in the world and was created in conjunction with the Kyoto Protocol.
After voluntary trials in the UK and Denmark, Phase I commenced operation in January 2005 with all 15 (now 25 of the 27) member states of the European Union participating. [ 33 ] The program caps the amount of carbon dioxide that can be emitted from large installations, such as power plants and carbon intensive factories and covers almost half of the EU's Carbon Dioxide emissions. [ 34 ] Phase I permits participants to trade amongst themselves and in validated credits from the developing world through Kyoto's Clean Development Mechanism.
Whilst the first phase (2005 - 2007) has received much criticism due to oversupply of allowances and the distribution method of allowances (via grandfathering rather than auctioning), Phase II links the ETS to other countries participating in the Kyoto trading system. The European Commission has been tough on Member States' Plans for Phase II, dismissing many of them as being too loose again. [ 35 ] In addition, the first phase has established a strong carbon market. Compliance was high in 2006, increasing confidence in the scheme, although the value of allowances dropped when the national caps were met.
All EU member states have ratified the Kyoto Protocol, and so the second phase of the EU ETS has been designed to support the Kyoto mechanisms and compliance period. Thus any organisation trading through the ETS should also meet the international trading obligations under Kyoto.
[edit] New Zealand.
The New Zealand Government introduced a bill for emissions trading schemes before a select committee. Various reports by a range of groups support the scheme but differ in opinion as to how it should be implemented. [ 36 ] An interesting feature of the New Zealand Emissions Trading Scheme is that it includes forest carbon and creates deforestation liabilities for landowners. [ 37 ]
The emissions trading bill passed into law on 10 September 2008. On November 16 2008 the newly formed National-led government announced that it would delay implementation of the ETS pending a full review of climate change policy.
[edit] United States.
An early example of an emission trading system has been the SO 2 trading system under the framework of the Acid Rain Program of the 1990 Clean Air Act in the U. S. Under the program, which is essentially a cap-and-trade emissions trading system, SO 2 emissions are expected to be reduced by 50 percent from 1980 levels by 2010. Some experts argue that the "cap and trade" system of SO 2 emissions reduction has reduced the cost of controlling acid rain by as much as 80 percent versus source-by-source reduction [ 38 ] [ 39 ]
In 1997, the State of Illinois adopted a trading program for volatile organic compounds in most of the Chicago area, called the Emissions Reduction Market System. [ 40 ] Beginning in 2000, over 100 major sources of pollution in eight Illinois counties began trading pollution credits.
In 2003, New York State proposed and attained commitments from nine Northeast states to form a cap and trade carbon dioxide emissions program for power generators, called the Regional Greenhouse Gas Initiative (RGGI). This program is due to launch on January 1 , 2009 with the aim to reduce the carbon "budget" of each state's electricity generation sector to 10 percent below their 2009 allowances by 2018. [ 41 ]
Also in 2003, U. S. corporations were able to trade CO 2 emission allowances on the Chicago Climate Exchange under a voluntary scheme. In August 2007, the Exchange announced a mechanism to create emission offsets for projects within the United States that cleanly destroy ozone-depleting substances. [ 42 ]
In 2007, the California Legislature passed the California Global Warming Solutions Act, AB-32, which was signed into law by Governor Arnold Schwarzenegger. Thus far, flexible mechanisms in the form of project based offsets have been suggested for five main project types. A carbon project would create offsets by showing that it has reduced carbon dioxide and equivalent gases. The project types include: manure management, forestry, building energy, SF6, and landfill gas capture. California is also one of seven states and three Canadian province that have joined together to create the Western Climate Initiative, which has recommended the creation of a regional greenhouse gas control and offset trading environment. [ 43 ]
On November 17, 2008 President-elect Barack Obama clarified, in a talk recorded for YouTube, that the US will enter a cap and trade system to limit Global Warming. [ 44 ]
The 2010 United States federal budget proposes to support clean energy development with a 10-year investment of US $15 billion per year, generated from the sale of greenhouse gas (GHG) emissions credits. Under the proposed cap-and-trade program, all GHG emissions credits would be auctioned off, generating an estimated $78.7 billion in additional revenue in FY 2012, steadily increasing to $83 billion by FY 2019. [ 45 ]
[edit] Renewable energy certificates.
Renewable Energy Certificates, or "green tags", are transferable rights for renewable energy within some American states. A renewable energy provider gets issued one green tag for each 1,000 KWh of energy it produces. The energy is sold into the electrical grid, and the certificates can be sold on the open market for additional profit. They are purchased by firms or individuals in order to identify a portion of their energy with renewable sources and are voluntary.
They are typically used like an offsetting scheme or to show corporate responsibility, although their issuance is unregulated, with no national registry to ensure there is no double-counting. However, it is one way that an organization could purchase its energy from a local provider who uses fossil fuels, but back it with a certificate that supports a specific wind or hydro power project.
[edit] The carbon market.
Carbon emissions trading is emissions trading specifically for carbon dioxide (calculated in tonnes of carbon dioxide equivalent or tCO 2 e) and currently makes up the bulk of emissions trading. It is one of the ways countries can meet their obligations under the Kyoto Protocol to reduce carbon emissions and thereby mitigate global warming.
[edit] Market trend.
Carbon emissions trading has been steadily increasing in recent years. According to the World Bank's Carbon Finance Unit, 374 million metric tonnes of carbon dioxide equivalent (tCO 2 e) were exchanged through projects in 2005, a 240% increase relative to 2004 (110 mtCO 2 e) [ 46 ] which was itself a 41% increase relative to 2003 (78 mtCO 2 e). [ 47 ]
In terms of dollars, the World Bank has estimated that the size of the carbon market was 11 billion USD in 2005, 30 billion USD in 2006, [ 46 ] and 64 billion in 2007. [ 48 ]
The Marrakesh Accords of the Kyoto protocol defined the international trading mechanisms and registries needed to support trading between countries, with allowance trading now occurring between European countries and Asian countries. However, while the USA as a nation did not ratify the Protocol, many of its states are now developing cap-and-trade systems and are looking at ways to link their emissions trading systems together, nationally and internationally, to seek out the lowest costs and improve luidity of the market. [ 49 ] However, these states also wish to preserve their individual integrity and unue features. For example, in contrast to the other Kyoto-compliant systems, some states propose other types of greenhouse gas sources, different measurement methods, setting a maximum on the price of allowances, or restricting access to CDM projects. Creating instruments that are not truly fungible would introduce instability and make pricing difficult. Various proposals are being investigated to see how these systems might be linked across markets, with the International Carbon Action Partnership (ICAP) as an international body to help co-ordinate this. [ 50 ] [ 51 ]
[edit] Business reaction.
With the creation of a market for mandatory trading of carbon dioxide emissions within the Kyoto Protocol, the London financial marketplace has established itself as the center of the carbon finance market, and is expected to have grown into a market valued at $60 billion in 2007. [ 52 ] The voluntary offset market, by comparison, is projected to grow to about $4bn by 2010. [ 53 ]
23 multinational corporations came together in the G8 Climate Change Roundtable, a business group formed at the January 2005 World Economic Forum. The group included Ford, Toyota, British Airways, BP and Unilever. On 9 June 2005 the Group published a statement stating that there was a need to act on climate change and stressing the importance of market-based solutions. It called on governments to establish "clear, transparent, and consistent price signals" through "creation of a long-term policy framework" that would include all major producers of greenhouse gases. [ 54 ] By December 2007 this had grown to encompass 150 global businesses. [ 55 ]
Business in the UK have come out strongly in support of emissions trading as a key tool to mitigate climate change, supported by NGOs. [ 56 ] However, not all businesses favor a trading approach. On December 11, 2008, Rex Tillerson, the CEO of Exxonmobil, said a carbon tax is "a more direct, more transparent and more effective approach" than a cap and trade program, which he said, "inevitably introduces unnecessary cost and complexity." He also said that he hoped that the revenues from a carbon tax would be used to lower other taxes so as to be revenue neutral. [ 57 ]
[edit] Measuring, reporting, verification (MRV) and enforcement.
Meaningful emission reductions within a trading system can only occur if they can be measured at the level of operator or installation and reported to a regulator. For greenhouse gases all trading countries maintain an inventory of emissions at national and installation level; in addition, the trading groups within North America maintain inventories at the state level through The Climate Registry. For trading between regions these inventories must be consistent, with equivalent units and measurement technues.
In some industrial processes emissions can be physically measured by inserting sensors and flowmeters in chimneys and stacks, but many types of activity rely on theoretical calculations for measurement. Depending on local legislation, these measurements may require additional checks and verification by government or third party auditors, prior or post submission to the local regulator.
Another critical part is enforcement. [ 58 ] Without effective MRV and enforcement the value of allowances are diminished. Enforcement can be done using several means, including fines or sanctioning those that have exceeded their allowances. Concerns include the cost of MRV and enforcement and the risk that facilities may be tempted to mislead rather than make real reductions or make up their shortfall by purchasing allowances or offsets from another entity. The net effect of a corrupt reporting system or poorly managed or financed regulator may be a discount on emission costs, and a (hidden) increase in actual emissions.
[edit] Criticism.
There are critics of the methods, mainly environmental justice nongovernmental organizations (NGOs) and movements, who see carbon trading as a proliferation of the free market into public spaces and environmental policy-making. [ 59 ] They level accusations of failures in accounting, dubious science and the destructive impacts of projects upon local peoples and environments as reasons why trading pollution allowances should be avoided. [ 60 ] In its place they advocate making reductions at the source of pollution and energy policies that are justice-based and community-driven. [ 61 ] Most of the criticisms have been focused on the carbon market created through investment in Kyoto Mechanisms. Criticism of 'cap and trade' emissions trading has generally been more limited to lack of credibility in the first phase of the EU ETS.
Critics argue that emissions trading does little to solve pollution problems overall, as groups that do not pollute sell their conservation to the highest bidder. Overall reductions would need to come from a sufficient and challenging reduction of allowances available in the system.
Regulatory agencies run the risk of issuing too many emission credits, diluting the effectiveness of regulation, and practically removing the cap. In this case, instead of any net reduction in carbon dioxide emissions, beneficiaries of emissions trading simply do more of the polluting activity. The National Allocation Plans by member governments of the European Union Emission Trading Scheme were criticised for this when it became apparent that actual emissions would be less than the government-issued carbon allowances at the end of Phase I of the scheme.
They have also been criticised for the practice of grandfathering, where polluters are given free allowances by governments, instead of being made to pay for them. [ 62 ] Critics instead advocate for auctioning the credits. The proceeds could be used for research and development of sustainable technology. [ 63 ]
Critics of carbon trading, such as Carbon Trade Watch, argue that it places disproportionate emphasis on individual lifestyles and carbon footprints, distracting attention from the wider, systemic changes and collective political action that needs to be taken to tackle climate change. [ 59 ] Groups such as the Corner House (organisation) have argued that the market will choose the easiest means to save a given quantity of carbon in the short term, which may be different to the pathway required to obtain sustained and sizable reductions over a longer period, and so a market led approach is likely to reinforce technological lock-in. For instance small cuts may often be achieved cheaply through investment in making a technology more efficient, where larger cuts would require scrapping the technology and using a different one. They also argue that emissions trading is undermining alternative approaches to pollution control with which it does not combine well, and so the overall effect it is having is to actually stall significant change to less polluting technologies.
The problem of unstable prices can be resolved, to some degree, by the creation of forward markets in caps. Nevertheless, it is easier to make a tax predictable than the price of a cap. However, the corresponding uncertainty under a tax is the level of emissions reductions achieved.
The Financial Times wrote an article on cap and trade systems that argues that "Carbon markets create a muddle" and ". leave much room for unverifiable manipulation". [ 64 ]
More recent criticism of emissions trading regarding implementation is that old growth forests (which have slow carbon absorption rates) are being cleared and replaced with fast-growing vegetation, to the detriment of the local communities. [ 65 ]
Recent proposals for alternative schemes that seek to avoid the problems of Cap and Trade schemes include Cap and Share, which at May 2008 is being actively considered by the Irish Parliament, and the Sky Trust schemes.