Summer Banks
SaraJEmissions Trading
March 19th 2007 05:50
So... back to it. I do apologise for my slackness readers. What a time to be doing a climate change blog! So much going on, particularly with all the politics going on at the moment. Has anyone any thoughts on the new theory? I hear there has been a documentary in Britain which says that the rise in temperature preceded the rise in CO2 and therefore, the current temperature increases aren't linked to fossil fuels being burnt - check it out here. Any thoughts? I will definitely be doing some research into this, but would be interested to see if any of the readers have anything insightful to add.
So, last post (almost a month ago... I am so sorry), I introduced some of you to the Kyoto Protocol. The Protocol is quite special, as it tries to use market mechanisms to reduce the burning of fossil fuels. Essentially - it allows carbon trading.
Trading is a market mechanism. Typically, trading works by setting some kind of limit on a commodity and letting the market decide how to allocate it. I'm not an economist, but my understanding is basic supply and demand mechanisms will dictate that the commodity will go to those who need it most (read: are prepared to pay more for it). In NSW, legislation is coming in for water and biodiversity to be traded as well as carbon... dont even get me started on biobanking).
Trading under the Kyoto protocol works by setting a limit on the amount of GHG's that can be produced. The limit (forgive me if Im repeating the content of my last post) is set relative to 1990 emissions levels (NZ for example has a target of 5% above 1990 levels). The target across all developed countries which have ratified is below 1990 levels. The penalty for not meeting the target is a more stringent requirement for the next commitment period.
Trading is allowed by directly trading credits between parties. So, if country A does not look like it will meet its target, and country B will, country A can acquire credits from country B. A country also has the ability to generate extra credits through the Clean Development Mechanism (CDM). I quite like the CDM idea... its a bit novel. Basically, if NZ wanted to, it could apply to the CDM executive board to recieve credits in response for a project it will carry out in a developing country, such as China. The project needs to be one that reduces the amount of emissions which would have been produced in the developing country. So, for example, NZ can build a windfarm in China, and in consideration for that investment will obtain credits for the amount of GHG gases it has saved (which is likely to be measured by the amount of GHGs saved by using renewable power instead of coal fired). The idea is to facilitate investment of new technologies and clean practices into the economies which are focused primarily on growth and not necessarily on sustainable growth.
There are 2 mechanisms for creading credits, the other one is through Joint Implementation. Joint Implementation allows a country to obtain credits for any investment into GHG reducing projects, such as Carbon Sinks. The project must be approved by the Joint Implementation Supervisory Committee. The science of Carbon Sinks is a little hazy, but this was a large point of debate for some countries (NZ being one of them I think) so was allowed in order to increase the ratification rate.
The first commitment period for the Kyoto Protocol is from 2008 until 2012. 2008 isnt very far away at all! Many countries (and the EU as a regional entity) are dealing with their targets by implementing local trading regimes which allow companies, or individuals to trade credits. For example, although Oz hasnt ratified, in NSW and ACT there is the Greenhouse Gas Abatement Scheme, which is for generators or suppliers of electricity. A registered corporation must report its emissions to the regulator each year, and is able to purchase credits in order to meet its targets. There is also the ability to generate credits through initiatives which reduce the emissions of GHG, for example by reducing power consumption through upgrading a power plant.
Market mechanisms definitely have their advantages. However, I always wonder - and maybe it is my green roots - at what stage do you get to before big brother has to step in. If we consider the current water shortage, is trading water rights enough, or do you need to get to a stage where the government steps in through using taxes or just limiting water consumption?
Is allowing market mechanisms going to lead us down the same path it lead those from Easter Island too... will we just keep going until theres nothing to support us? Maybe thats a little melodramatic, who knows - what do you think?
So, last post (almost a month ago... I am so sorry), I introduced some of you to the Kyoto Protocol. The Protocol is quite special, as it tries to use market mechanisms to reduce the burning of fossil fuels. Essentially - it allows carbon trading.
Trading is a market mechanism. Typically, trading works by setting some kind of limit on a commodity and letting the market decide how to allocate it. I'm not an economist, but my understanding is basic supply and demand mechanisms will dictate that the commodity will go to those who need it most (read: are prepared to pay more for it). In NSW, legislation is coming in for water and biodiversity to be traded as well as carbon... dont even get me started on biobanking).
Trading under the Kyoto protocol works by setting a limit on the amount of GHG's that can be produced. The limit (forgive me if Im repeating the content of my last post) is set relative to 1990 emissions levels (NZ for example has a target of 5% above 1990 levels). The target across all developed countries which have ratified is below 1990 levels. The penalty for not meeting the target is a more stringent requirement for the next commitment period.
Trading is allowed by directly trading credits between parties. So, if country A does not look like it will meet its target, and country B will, country A can acquire credits from country B. A country also has the ability to generate extra credits through the Clean Development Mechanism (CDM). I quite like the CDM idea... its a bit novel. Basically, if NZ wanted to, it could apply to the CDM executive board to recieve credits in response for a project it will carry out in a developing country, such as China. The project needs to be one that reduces the amount of emissions which would have been produced in the developing country. So, for example, NZ can build a windfarm in China, and in consideration for that investment will obtain credits for the amount of GHG gases it has saved (which is likely to be measured by the amount of GHGs saved by using renewable power instead of coal fired). The idea is to facilitate investment of new technologies and clean practices into the economies which are focused primarily on growth and not necessarily on sustainable growth.
There are 2 mechanisms for creading credits, the other one is through Joint Implementation. Joint Implementation allows a country to obtain credits for any investment into GHG reducing projects, such as Carbon Sinks. The project must be approved by the Joint Implementation Supervisory Committee. The science of Carbon Sinks is a little hazy, but this was a large point of debate for some countries (NZ being one of them I think) so was allowed in order to increase the ratification rate.
The first commitment period for the Kyoto Protocol is from 2008 until 2012. 2008 isnt very far away at all! Many countries (and the EU as a regional entity) are dealing with their targets by implementing local trading regimes which allow companies, or individuals to trade credits. For example, although Oz hasnt ratified, in NSW and ACT there is the Greenhouse Gas Abatement Scheme, which is for generators or suppliers of electricity. A registered corporation must report its emissions to the regulator each year, and is able to purchase credits in order to meet its targets. There is also the ability to generate credits through initiatives which reduce the emissions of GHG, for example by reducing power consumption through upgrading a power plant.
Market mechanisms definitely have their advantages. However, I always wonder - and maybe it is my green roots - at what stage do you get to before big brother has to step in. If we consider the current water shortage, is trading water rights enough, or do you need to get to a stage where the government steps in through using taxes or just limiting water consumption?
Is allowing market mechanisms going to lead us down the same path it lead those from Easter Island too... will we just keep going until theres nothing to support us? Maybe thats a little melodramatic, who knows - what do you think?
| 111 |
| Vote |
subscribe to this blog
Comment by Ecobel
I am afraid I may have misled you about the Global Warming Swindle documentary (it was I who sent Sara the link). It is entertaining and I was curious about some of its claims, but it seems that most of the dissent is either out of date or just plain misleading. Here is a link to New Scientist's reaction and some answers to the questions posed by the documentary: Really Long Link
Now I am up for dissent as much as the next person- but why they had to make an antagonistic, flawed documentary is beyond me. Something else beyond me is why it matters whether the observed warming is caused by humans - Sa maybe you could discuss this? We have scientific proof that CO2 insulates the planet, so pumping more up there will make matters worse. Why does it matter whether nature does it more than us?
And I have a comment on the Clean Development Mechanisms. They seem great in theory, but unfortunately they make a mockery out of emissions capping. The reason is this: developed countries have caps on emissions. Developing countries don't, they can emit as much as they like. When a country like NZ says we will build a windfarm in Malawi and not a coal fired power plant they get the difference back in extra emissions. So say a windfarm emits 20000tonnes of CO2 less than a coal fired power plant, then NZ gets 20000tonnes EXTRA to emit. If Malawi had a cap and gave the 20000 tonnes to NZ then the system would work. But it doesn't. As long as a developed country invests in renewable energy in a developing country and says it could have built the worst type of plant, it gets the difference back. So emissions aren't really capped at all.
Joint Implementation works though because it involves a capped country investing in another capped country- i.e. countries in Eastern Europe.
And that ends Bel's blog today. Sara, great work, very concise and informative.
xbel