Growing Markets Worldwide
The E.U. experience teaches that trading systems, like all markets, do not arise spontaneously. Economic historians have determined that markets require strong underlying institutions to assign property rights, monitor behavior and enforce compliance. The E.U. has long kept track of other pollutants emitted by exactly the same industrial sources. Likewise, European administrative law courts have a long history of effective enforcement. Absent these institutions, emission credits in Europe would be worthless—just as bad money drives good from circulation, as economists often have observed. Yet even the E.U. is finding it difficult to create the strong regulatory institutions needed for an effective pollution control market. The European Monetary Union—the parent organization of the euro currency—faced similar challenges when leading countries such as France and Germany devalued the common currency by running huge budget deficits and amassing large debts. Even though the regulatory institutions were stronger than those fostering Europe’s carbon cap-and-trade system, the European Monetary Union proved relatively ineffective at keeping its powerful members in line when commitments grew inconvenient.
The central role of institutions and local interests accounts for why the real world has developed many different carbon trading systems [see figure 2]. From these varied markets, a global trading system may eventually emerge. But the process of evolution will occur from the bottom up, rather than from the top down via an international treaty mandate such as the Kyoto Protocol. Because national circumstances vary so widely, this evolution will probably unfold over many decades. Integrating different national carbon markets would be akin to creating common currencies—a task that requires close cooperation and alignment of goals. It took the E.U. four decades to create the euro; it may take the world even longer to invent a single carbon credit that is legal tender and equally valuable around the globe.
For now, the European emissions trading system has emerged as the core of a nascent global market because it features the strongest institutions and exchanges the greatest volume of credits. During the next few years, however, the American public will likely grow more aware of the dangers greenhouse emissions pose to our climate and Congress will search for a political compromise to stem the threat. If the U.S. establishes a federal trading system in response, the scale of U.S. emissions trading could supplant the dominance of the E.U. in the budding global carbon market.
Exactly how the U.S. market unfolds will be complicated by two factors. One issue arises because several states in the northeast and the west, weary of the federal government’s inaction, are moving to create their own carbon trading systems [see figure 3]. We doubt that these state systems will survive intact once a federal plan is in place, not least because electricity generation (which produces significant quantities of CO2) is fungible across most of the country and not easily amenable to a state-by-state approach. Nonetheless, some states may retain stricter rules, which could result in a patchwork of trading systems. The other complication relates to the fact that carbon emissions and investments are affected not only by explicit carbon regulations and prices, but also a wide array of other policy directives. Twenty-five states and the District of Columbia have, for example, already adopted standards for renewable power that are based, in part, on the goal of cutting CO2 releases. By 2020, these existing renewable portfolio standards will reduce carbon dioxide emissions by 108 million tons annually, say analysts at the Union of Concerned Scientists. Judged only by carbon reductions, renewable portfolio standards constitute a costly way to cut carbon because they concentrate investment on only a few power-generating technologies. Some experts wisely advocate a smarter “carbon portfolio standard” that would reward a wider range of low-carbon technologies such as advanced coal-fired power plants.
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Add CommentThis type of system will just make undeveloped countries more competitive, now if the credits are only within a country or group it might be OK. In addition positive action to reduce our impact on the environment and to mitigate the effects are required. These credits do nothing in these areas.
Reply | Report Abuse | Link to thisQuestion: To mesh a carbon tax with cap-and-trade, should the government not put a MINIMUM price on carbon, not a ceiling, as the article asserts? (Ref. 3rd para. under 'A Four-Step Plan.')
Reply | Report Abuse | Link to thisE.D.
Ottawa
Canada
Clicking on the links to the Figures brings one to a slide show on endangered birds!
Reply | Report Abuse | Link to thisDeleted and replaced with revised version
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Edited by Duane Pendergast at 12/21/2007 10:36 AM
This is an excellent discussion and review of carbon trading concepts and initiatives.
Reply | Report Abuse | Link to thisThere is, however, no discussion of market possibilities to encourage removal of carbon dioxide from the atmosphere. Perhaps this is a consequence of the common assumption that it is better to capture emissions at source rather than try to deal with them after release.
The sidebar on "The Carbon Trade" focuses on cap and trade and so-called "offset exchange" in connection with the Clean Development Mechanism (CDM). I find the use of "offset" in that context somewhat of a misnomer as the carbon emissions discussed may not be offset in the usual sense. In the example discussed, it is implied that emissions from the developed countries will be compensated by reductions in emissions in developing countries. I suspect the reality in practice will be that increasing emissions from the developed countries will support projects in developing countries which will have somewhat lower emissions than might have occurred without CDM. The total net result will be increased carbon dioxide emissions.
There is developing recognition of a concept that would actually remove carbon dioxide from the atmosphere and convert it to durable char or charcoal, which could then be used to sequester carbon in soil. Some researchers believe the sequestered carbon will play an additional role by significantly improving soil fertility. Interested readers can find information on this concept by searching for "terra preta" on the WWW.
Perhaps policy makers should relax their dogged focus on reducing CO2 emissions and consider the possibility they may constitute an opportunity to enhance the environment for life on earth.
Duane Pendergast
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Edited by Duane Pendergast at 12/21/2007 10:29 AM
Sorry for double post
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Edited by erichj at 12/22/2007 10:28 AM
I thought this ubiquitous carbon sink might interest you. Here's the current news and links on Terra Preta (TP)soils and closed-loop pyrolysis of Biomass, this integrated virtuous cycle could sequester 100s of Billions of tons of carbon to the soils.
Reply | Report Abuse | Link to thisTerra Preta Soils Technology To Master the Carbon Cycle
This technology represents the most comprehensive, low cost, and productive approach to long term stewardship and sustainability.Terra Preta Soils a process for Carbon Negative Bio fuels, massive Carbon sequestration, 1/3 Lower CH4 & N2O soil emissions, and 3X Fertility Too.
UN Climate Change Conference: Biochar present at the Bali Conference
http://terrapreta.bioenergylists.org/steinerbalinov2107
SCIAM Article May 15 07;
http://www.sciam.com/article.cfm?articleID=5670236C-E7F2-99DF-3E2163B9FB144E40
After many years of reviewing solutions to anthropogenic global warming (AGW) I believe this technology can manage Carbon for the greatest collective benefit at the lowest economic price, on vast scales. It just needs to be seen by ethical globally minded companies.
Could you please consider looking for a champion for this orphaned Terra Preta Carbon Soil Technology.
The main hurtle now is to change the current perspective held by the IPCC that the soil carbon cycle is a wash, to one in which soil can be used as a massive and ubiquitous Carbon sink via Charcoal. Below are the first concrete steps in that direction;
S.1884 The Salazar Harvesting Energy Act of 2007
A Summary of Biochar Provisions in S.1884:
Carbon-Negative Biomass Energy and Soil Quality Initiative
for the 2007 Farm Bill
http://www.biochar-international.org/newinformationevents/newlegislation.html
If you have any other questions please feel free to call me or visit the TP web site I've been drafted to co-administer. http://terrapreta.bioenergylists.org/?q=node
It has been immensely gratifying to see all the major players join the mail list , Cornell folks, T. Beer of Kings Ford Charcoal (Clorox), Novozyne the M-Roots guys(fungus), chemical engineers, Dr. Danny Day of EPRIDA , Dr. Antal of U. of H., Virginia Tech folks and probably many others who's back round I don't know have joined.
If pre-Columbian Kayopo Indians could produce these soils up to 6 feet deep over 15% of the Amazon basin using "Slash & CHAR" verses "Slash & Burn", it seems that our energy and agricultural industries could also product them at scale.
Harnessing the work of this vast number of microbes and fungi changes the whole equation of energy return over energy input (EROEI) for food and Bio fuels. I see this as the only sustainable agricultural strategy if we no longer have cheap fossil fuels for fertilizer.
We need this super community of wee beasties to work in concert with us by populating them into their proper Soil horizon Carbon Condos.
Erich J. Knight
Shenandoah Gardens
1047 Dave Berry Rd.
McGaheysville, VA. 22840
(540) 289-9750
shengar@aol.com
who can deny the politics behind the science of climate ,and how some thinktanks with funding support from north influence policies .is the finding of IPCC on glcier melts the tip of the iceberg of the science hoodo act to serve the interests of the developed world. why not the north show the lead in changing life styles and social systems to suit the ethics and economics of sustainable resource use and development.
Reply | Report Abuse | Link to thisno one can deny the economic advantage to the west in carbon trade while continuing to pollute.the advantage to the less developed is inflated and projected while the cost benefit in real terms favours the more developed .the developing world is increasingly being depicted as more responsible for future pollution. the science behind the future scenarios are highly dubious and influenced by vested intersts through funding support and peer pressure.
china and india are being shown as villains through data manipulation and GCM computer dta are being used for this jugglery. the world bodies are being hijacked partly for this ,and pachauri is suitably awarded. the very architects of the carbon trading have finally backed out of the protocol so that their interests are best served both ways,and scuttling that of competitors and potential growth centers.the credits are loaded in favour of the west through science and technology fixes . the world bodies are toeing the line for funds. what is needed is not more of the same but a drastic relook at the western model of growth and development through resource exploitation and depletion ,and focus on economics at the cost of ecology ,in real terms ,while making it appear as if the south is more obsessed with growth than environment through a game of data manipulation and jugglery of all sorts.it is high time that the politics of climate is called off through more transparent science. the developing world needs to be equipped and oriented towards this through support structures and a process of relearning
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