Carbon trading and a new climate deal

December 18, 2009

(Updates with comments from Karen Alderman Harbert)

cube

A key component of a prospective climate deal coming into Copenhagen has been the targets for cuts in greenhouse gas emissions.

Targets would help put a “price” on carbon emissions that could then be bought and sold under a cap and trade scheme. (Click here for a related article.)

Proponents of the potentially lucrative market say it provides clear incentives to reach targets or even overshoot them, while opponents say the system would give big polluters a way around any targets.

That leads to our question of the day: What role should carbon trading play in a new U.N. climate deal?

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karen

Karen Alderman Harbert, president and CEO, Institute for 21st Century Energy, U.S. Chamber of Commerce:

The single most important element for an international climate agreement to be successful is to ensure that the enormous sums of capital that is needed to transform the world’s energy sector can be invested.

The trillions in private sector investment required for that transformation will dwarf the size of any carbon market.

However,  carbon markets, where they are used, should strive to support private sector investment and innovation.

It is important that these markets be transparent and have integrity. Even more important, because of the sheer volume of potential trades, safeguards need to be in place to reduce the risk of manipulation and fraud.

That’s why how we “measure, report, and verify” reductions is a key issue for business.

Without sound accounting standards, these markets will not have any integrity.

As the Major Economies Business Forum statement said, “Business, based on its long  experience with  greenhouse gas and financial reporting, stands ready to help define and implement the appropriate  tools.”

We also need to be very concerned about proposals that would set up huge new global regulatory bodies to oversee any such market.

There would be no quicker way to squelch investments than to subject business to a burdensome international regulatory entity.

That would be a step backwards from the transparency and predictability that is at the cornerstone of any successful approach.

While a global greenhouse gas market will not appear in the short run, regional markets should be simplified and improved to facilitate expansion and linking, where they are employed.

Addressing potential transitions involving existing and emerging mechanisms will be necessary, maintaining clear and common rules and transparency.

In particular, the CDM should be enhanced and simplified for broader private sector utilization.

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knut2

Knut Alfsen, Head Research Director, CICERO

At one level the climate problem is really easy. All it requires is the development and implementation of “clean” or “climate friendly” technologies on a massive scale.

Now, the implementation bit is again “easy”. Just make the right (i.e. climate friendly) choice the cheapest.

This will happen if we put a high enough price on greenhouse gas emissions, either by directly taxing the emissions, or by giving emission rights a price by introducing a cap and trade system.

So far the choice under the U.N. climate convention and the Kyoto protocol has been a cap and trade system.

Thus, carbon (or greenhouse gas) trading is essential for implementing the climate friendly solutions, and hence should play a large role in any climate treaty.

However, implementing existing climate-friendly solutions is not enough. We also need to develop through research and demonstration projects, new climate-friendly options.

Unfortunately, a cap and trade system alone is unlikely to deliver the necessary technological development. Thus, we need something in addition to the cap and trade mechanism.

This could be the introduction of standards or other regulations, or it could be direct public support (money!) for research and development activities.

As mentioned, the main focus of the climate negotiations has so far been on emission regulations via a cap and trade system.

It is high time that the other half of the solution is being addressed.

My belief is that this will also mitigate the confrontational stance we have seen between developed and developing countries so far, and foster a more cooperative spirit around the task of developing new technologies.

In conclusion, carbon trade is an important bit of any climate treaty, but should not be as dominating as it has been till now.

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(Photo: People watch an illuminated so-called CO2 cube in the water of St Jorgens Lake in front of Tycho Brahe Planetarium in Copenhagen, December 7, 2009. The cube visually shows the amount of carbon dioxide produced by an average person in one month. REUTERS/Pawel Kopczynski)

3 comments

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Carbon trading is about masking the problem. Let’s looks at what the world really needs — cutting down on all the garbage that is making the mess, and I don’t mean trash. If we cut our consumption, our destructive hunger for material goods, we will be so much better off — because remember, for every stupid piece of made-in-China plastic in your house, there is a history of its production and delivery. Eventually you will throw it in a landfill, but that is only a part of the problem. Forget the lame expectations set out by the deal in Copenhagen — let’s beat those expectations. Our future grandchildren will thank us.

Posted by GMaids | Report as abusive

We are a throw away society in the U.S.. Cars designed to last 75,00 miles, clothing that comes apart in the wash. We fight bitterly over extending health care to those who cannot get insurance. Big city businesses have left ethnic neighborhoods leaving little economic opportunity. It is as if here in America some people are throw away too. Why would we see the rest of the world any differently?

Posted by eddieblack | Report as abusive

Thanks
Im Neville Unduka from Papua New Guinea. I believe in cleanliness of our environment and the air we breath in. With the clean air we preserva the most important aspect of life on earth, HUMAN BEING. God created human being to live and enjoy the earth and not destroy himself or herself. Carbon Trade is one area of saving and preserving our beings on earth and Papua New Guinea, A country in the Pacific has a big forest and green climate that can help the World. I have an registered Association which has been working with the Climate Changer and Carbon Trade in Port Moresby, PNG. I would like to get more information on Carbon Trade and can help with that, by giving our forest for Carbon Trade and assist the world with that…Anycomments are welcome.

Neville Unduka
PNGEI, P.O. Box 1791, BOROKO 111, NCD
PAPUA NEW GUINEA.
Phone/Fax: +675 3251077
Email: nyunduka@yahoo.com.au

Posted by Kinaripa | Report as abusive