Global environmental challenges
Cap and trade not the solution, climate scientist says
Fighting climate change is a huge investment opportunity but not through emissions trading and investors should instead put their money into renewables which will power the economy in the future, says a leading environmental scientist and cap and trade expert.
As yesterday’s walkout by African nations showed, getting anyone to agree on anything at the U.N. Climate Conference is easier said than done. The use of markets to address pollution is no different. Supporters of cap and trade — the system which allows companies or groups who meet their emissions targets to sell their remaining carbon credits — are out in force, but so are the groups who say the scheme prevents less responsible companies from breaking their bad habits.
Scientist Payal Parekh, from International Rivers, has come to Copenhagen to lobby on the need to reduce greenhouse gas emissions and to highlight the failures of the cap and trade system. She said: “We are working here to ensure that we get ambitious reductions in carbon dioxide and other greenhouse gases so that we can make a smooth and efficient transition to a clean and green economy. This means that we really need to set up a system that rewards innovators as opposed to allowing dirty industries to continue polluting.
“Cap and trade favours dirty industries as opposed to innovators. The reasons for this are that in cap and trade systems that are up and running, most notably in the European Union, polluters are given rights to continue their dirty habits and there are also loopholes such as offsets which allow them to not have to make their emissions reductions at home but instead push them off on to developing countries.”
Proponents of the buying and selling of carbon credits believe that it is vital world leaders reach a deal on emissions targets by the end of the Copenhagen Conference. The head of the Asian Development Bank, Haruhiko Kuroda, recently told Reuters that failure to reach a deal could cause the collapse of the carbon market.
“Cap and trade is vitally important because without a price on carbon there isn’t a clear signal to the market place as to what it is the market should be recognizing as real value going forward. It is possible to put a price on things without a cap and trade scheme … but it will be immeasurably more difficult,” said Fiona Wain, chief executive officer of Environment Business Australia.
You can hear more of Wain’s views on the importance of a cap and trade system in the clip below.
Parekh disagrees, arguing that cap and trade merely moves pollution around rather than providing a sustainable solution to climate change. She is calling for ambitious emission reduction targets and the closing of loopholes that allow these cuts to be made abroad.
“We would like to see a cap that is ambitious and in line with what the most recent science is telling us. So that means we need reductions from developed countries of 45% below 1990 levels. And we would like to also see that developed countries have to meet these emissions reductions at home so the negotiations should exclude or severely limit the use of offsets,” she said.
In the clip below, Parekh argues that instead of cap and trade, investors should place their money in renewable energy sources.