What Is Emissions Trading?
In the past 40 years, an increasing number of people have shown interest in protecting the environment and preserving the natural resources of the Earth. Part of this effort has been devoted to limiting and reducing the smoke and other waste products that come from manufacturing and energy generation.
Emissions trading is intended to help control this pollution by giving companies incentives to reduce pollutants from their plants. These economic incentives have also been given the common term cap-and-trade. For example, a plant that burns coal to produce energy might be putting more pollutants into the air from its smokestacks than is allowed by regulations.
Governments issue permits that allow companies to emit a certain amount of pollution during a set period of time. The total limit might include a number of credits or individual allowances. If a particular manufacturer or coal-burning energy plant needs to increase its output of pollution in response to demand, for example, it may purchase credits or allowances from another firm that doesn’t intend to use them.
Many of the supporters of emissions trading or cap-and-trade see this process as the buyer of credits paying for the additional pollution – essentially a charge for the added problems that may arise from the extra pollutants. These supporters also view the seller of credits as a firm that is holding down the amount of pollution in the atmosphere.
The general view is that the total pollution is not increased and may actually be reduced when credit sellers hold down the amount of pollutants.
There are regional and national programs designed to encourage cap-and-trade, including wide-ranging programs in the United States, Europe and in other areas of the globe. Critics of emissions trading see the process as a “scheme” that proposes to improve the environment but doesn’t really achieve that goal. Some studies show that emissions trading might actually reduce or control manufacturing and coal-burning pollution. However, the long-term results are still not clear.
Critics note that cap-and-trade puts the emphasis on economics and the market, rather than focusing on the actual problem of pollution and protecting the environment. However, supporters insist that some companies do reduce emissions precisely in order to benefit from selling their credits. In this view, the important thing is not how, but how much.
Emissions-trading programs also put the focus of control on an entire industry or group of businesses, giving individual businesses within the group incentives to work together. The interesting result of all the programs might well be the creation of a new commodity – emissions.
It remains to be seen if this byproduct is truly part of a nation’s gross domestic product, since it’s measured in money terms. Carbon is followed as a commodity in what has become known as the carbon market.
Details of the worldwide agreement on emissions trading also provide for units for sale to be in the form of land usage, forest activity and general develop using cleaner methods. A massive records-and-reporting program has been constructed to keep track of the cap-and-trade activity involved in trading industrial emissions.
Category: Environment, Science