Wednesday, October 18, 2006

Add California to Northeast CO2 Cap and Trade System

The Associated Press has reported that a visit to New York City by Governor Arnold Schwarzenegger has resulted in the governor deciding to have California join six northeastern states (it should be seven when Maryland joins next year) in a program to reduce carbon dioxide emissions by power plants. Under this program, power plants are allowed to emit a certain amount of carbon dioxide and those plants that exceed their limit can buy credits from plants that do not reach their limit. Whether this type of market trading scheme is effective for capping carbon dioxide emissions remains to be seen.

The following analysis of the criticism of emissions trading comes from the PBS Online NewsHour:

Not all agree that the current cap-and-trade proposals are the best way to reduce greenhouse gas emissions. Ellerman [Danny Ellerman, Executive Director of The Center for Energy and Environmental Policy Reseach at MIT] divides critics of emissions trading into two groups: those that oppose putting a price on carbon and those that prefer taxes or a command-and-control approach over emissions trading.

"In the U.S. at least, I think it is fair to say that companies would prefer emissions trading to any other alternative if they are going to be required to take action to address some environmental problem," wrote Ellerman in an e-mail.

The complexity of any trading program makes it difficult for people understand and also difficult for them to follow. It requires setting up a detailed registry of emissions and a complicated system of accounting.

Because trading works in some sectors and not others, there are complaints about the fairness of regulating certain sectors such as power plants when greenhouse emissions come from the entire economy. Environmentalists and politicians are pushing for trading programs as part of a broad spectrum of policies tailored to each sector.

No comments: