Profiting from Cap and Trade
Rycordell (Flickr)Could the very same emissions trading schemes designed to limit greenhouse gases actually encourage polluters to produce more emissions?
It’s a distinct possibility, according to Sebastian Mallaby’s recent Washington Post article on the subject.
Emissions trading schemes generally work through a credit trading system. Credits are created when certain companies are emitting less than is permitted by carbon caps in their countries. Those credits can then be sold to industries that are producing more than their share of greenhouse gas emissions. The net effect is that total emissions are kept under a certain cap level, while financial incentives are created to encourage industries to emit less so they can become carbon creditors instead of carbon debtors.
As if often the case, however, Chinese companies are not playing by the same rules as the rest of the world. Some Chinese companies are skirting the system to make a profit without reducing their environmental impact. Mallaby writes:
“The mechanism appears to encourage industrial producers to emit extra greenhouse gases so they can capture them and pocket extra subsidies. Chinese emitters make such extraordinary profits from this system that the government has imposed a 65 percent tax on the windfall. In effect, the green budgets of the rich world subsidize the Chinese government.”
In our Technology Foresight project, Social Technologies has covered a variety of forecasts that outline the need for cap and trade systems in both World 1 and World 2 countries to abate greenhouse gas emissions. If market-based schemes are going to be a central component of future climate change policy, better regulation will be necessary to ensure that everyone operating in the market is playing by the rules. More evidence that countries are abusing the cap and trade systems to make a profit by polluting could put the future of these programs, as they are now envisioned, in jeopardy.
Kyle Spector
in China, Environment
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