New Doubts on Carbon Trading Systems
New Doubts on Carbon Trading Systems
Is a cap-and-trade program effective in reducing greenhouse gas emissions? Now new doubts have been raised about whether systems that allow companies to buy carbon emission credits if they exceed their caps is coming under question.
One swipe at the so called cap-and-trade system came recently when new data showed that the European Union’s cap-and-trade program has not cut carbon emissions. Industries such as power generation, steel, cement, aluminum, with some 11,500 factories, are covered by the EU scheme. However in the past few years, greenhouse emissions from these industries have actually gone up by about 1%. Part of the reason is that European governments have issued too many carbon permits This gives firms more incentive to buy credits rather then to take effective action in reducing emissions.
Point Carbon, a carbon market research firm recently found that carbon dioxide emissions reached 11914 metric tons last year in areas covered by the EU program.
Europe is still tinkering with their system in an effort to make it work more effectively. Regulators are trying to get governments to cut the number of permits they issue during the second phase of the scheme, from 2008 through 2012. The U.S. is paying close attention since there are several bills in Congress that would mandate a cap-and-trade style program covering U.S. companies. In addition, all three U.S. presidential candidates have come out in favor of such a carbon reduction system.
Evidence that the private sector seems committed to the program is a growing carbon trading market in Europe and now in the U.S. In Europe last year the value of all carbon credits traded exceeded $40 billion, up 55% for the previous year. Investment banks, hedge funds, brokers and other investors are trading credits like other commodities.
Some Advocate More Emphasis On Technology
Most scientists and high-level government and industry panels have pushed for market-based solutions to the climate change problem. But more voices are now being raised that such programs by themselves are not enough.
Many scientists now say that more investment in low-carbon technologies is needed. “Even with the cutback in wasteful energy spending, our current technologies cannot support both a decline in carbon dioxide emissions and an expanding global economy,” says Jeffrey D. Sachs, head of the Earth Institute at Columbia University. “If we try to restrain emissions without a fundamentally new set of technologies, we will end up stifling economic growth, including the development prospects for billions of people.”
Among the technologies that Sachs likes are: capturing and burying carbon dioxide, plug-in hybrid cars, and solar-thermal electric plants.
Still many believe that current efforts to cap emissions should be continued even as governments increase spending on new technologies.
“You can do a tremendous lot with available technology,” says Adil Najam, a professor at Boston University. “It is true that this will not be enough to lick the problem, but it will be a very significant and probably necessary difference.”