Emission trading seems like a win-win in the short term but not fair as a long-term solution to global warming.
Considering the pace at which global warming is changing the environment, even cynics are unable to ignore its importance. Also, considering factors like oil prices at a historical high, global food crisis due to diversion of crops for making hybrid fuels, derivative trading, food loss due to natural disasters, etc, each of us is personally affected with increased cost of living and contending with weather extremes. Not forgetting the drastic consequences for techies as we thrive in a global economy and are connected to businesses worldwide. Lately, there has been a heated debate about emission trading.
What is Emission Trading?
A decade ago, it was realized that without economic incentives, one cannot get governments worldwide to work together to stop global warming, this concept was floated at the United Nations Convention on Climate Change and agreed to by 192 countries that later signed the Kyoto Protocol. In Kyoto Protocol, different countries were allocated different emission limits. If the limit was exceeded, they could balance it by buying emission credits from countries that were below their allocated limits.
However, it is hard to assign emission credits to an entire country. Thus, it was decided that industries and other groups inside a country should be used to determine the emission limits, making them the proprietors of emission trading. The trading is done by a process called cap and trade where various companies that wish to trade approach either an international authority or a government body that assigns them an emission cap. This can be more easily explained through the mark-rank school system.
Assume the authority assigns a company ABC a 70% emission cap while another company DEF gets an emission cap of 60%. In the exams, however, ABC gets only 50% while DEF secures 80%. In a school system, ABC would rank lower as it got less marks than DEF. However, since pollution is considered harmful, higher is not considered better, thus, the mark-rank system is reversed. In the emission trading system, ABC is ranked higher as it got only 50% as opposed to its allocated 70%, earning a credit of 20%. This it can sell to DEF that went past its cap of 60% and got 80%. While ABC makes money by polluting less, DEF will lose money as it will have to buy credits from others to achieve its limit. Overall, the total emission levels set are met and pollution levels dont increase.
Simply put, companies that pollute less than their limit become sellers and those that pollute more than their prescribed limit become buyers. The buyers are penalized as they have to buy credits from the sellers. Thus, emission trading attaches a monetary tag to pollution, which hopefully will induce companies/countries to pollute less by adopting environment-friendly practices, and, in turn, reduce global emissions.
Is it Good?
Several companies worldwide are already indulging emission trading. This is particularly true for tech companies, especially in the energy, manufacturing, and IT
- Use of Alternative Energy Technologies will Increase: Some agree. John Findlay, London, says, With rising oil prices worldwide, change to alternative technologies like solar, wind, and hybrid fuels is inevitable especially in developed countries and emerging powers like India and China. This is good as it means less emissions. Others disagree. Jenny Jackson, Los Angeles, says, This is sheer baloney. Whoever thinks that ordinary people can afford the expensive hybrid models is crazy. For example, the auto-insurance rates are high and you cant get it fixed if there is a problem. For power to see a real change, we need alternative power on a massive scale. With powerful corporate lobbyists, this is not easy.
- Carbon Tax: Instead of emission trading, introduce carbon tax for the polluters, say some. J Ramakrishna, Hyderabad, says, Instead of emission trading which doesnt reduce total emission levels, it would be better if governments imposed a high tax on polluters. This will make them use energy-efficient technologies. Ashley Roebuck, systems consultant, US, disagrees, That doesnt make any fiscal sense. Taxing a company for emission will make production costlier, possibly cause its bankruptcy, and lead to massive layoffs. Since energy-related companies contribute substantially to pollution, itll result in oil price rise and related commodity prices.
- Trading on Poverty: Aditya Dasgupta, Pune, says, Emissions trading involves the trading of permits to emit greenhouse gases. Who are the biggest polluters? The West. And since they cant reduce emissions, they think by offering us money they can meet their goals. But what about the millions of people here who still dont have access to basic amenities? While we concentrate on poverty eradication, Western countries should change their destructive consumption patterns. Emission trading is wrong as it is like futures trading on poverty. Others disagree. Jessica Hamilton, Australia said, Poverty trading? Emission trading brings in money to poor countries that can be used to eradicate poverty. More importantly, companies/governments of emerging economies wont make the same mistakes the developed nations made.
- Clean Development Mechanisms: Emission trading will mean more companies will opt for clean development mechanism (CDM), so they can make money. Says Nisha Menon, New Delhi, If you look at bagasse (the pulp/dry waste left after the juice is extracted from sugar cane, grapes, etc) based cogeneration in sugar mills in India, carbon trading has driven companies to look at higher efficiency technologies to burn bagasse and generate more electricity which ends in the electricity supply pool. In a supply deficit situation, this may seem hypothetical but such efforts actually help in reducing the coal dominated utility capacity addition. Desiree Annaheim, Switzerland, disagrees, This might be true for certain companies. CDMs are harder to implement for companies from emerging economies because of the development factor. It would make more sense for developed countries to implement CDMs on a massive scale and offer developing countries economic incentives to implement them.
Way Forward
Emission trading seems like a win-win in the short term but not fair as a long-term solution to global warming. The way forward would be for individuals worldwide to choose energy fasting.
Energy fast is pretty much the same as a food fast, except you go completely without man-made energy for a day. But why energy fast instead of a natural resource like water fast. This is because after population pressures, human energy use is the second link in the chain of environmental destruction. All humans need energyfor warmth, cooking, manufacturing, transportation, and communication. Evidently, location, refining, production, and distribution of consumer-ready power itself require energy.
If you think that as an individual you cannot make a difference, think again. There is an old African proverb, If you think you are too small to make a difference, try sleeping in a room with a mosquito.(Deepa Kandaswamy. The author is the founder-moderator of the IndianWISE e-group.
(c) Deepa Kandaswamy. First serial rights, CyberMedia 2008. Any quotes or reprints from this article must link to this article and credit author Deepa Kandaswamy and Dataquest. This article may not be distributed in any manner without written consent from the author.)
