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THE CAP AND TRADE SYSTEMBy Mark Andrews18 March 2007 I am concerned about the environmental and equitable suitability of a "cap and trade system", which is a fundamental part of the Kyoto Protocol and involves putting a ceiling or cap on the amount of CO2 a country can pollute and allowing for the trading of rights to pollute. The cap gets smaller as time goes by, meaning carbon emitters/polluters have to cut their greenhouse gas emissions over time, but a big problem with opting for such an emissions trading system is that it rewards polluters and punishes green energy use because it hands out free permits to pollute and it gives the biggest permits to the biggest polluters. It also privatises the atmosphere for the benefit of certain business interests because citizens (consumers) are not given a share of polluting rights. Another big problem with it is that it does not provide enough incentives for carbon emission reductions because polluters can buy offsets (e.g. pay for a tree plantation, which could take many years to sink substantial atmospheric CO2), if they want to pollute more than their permit allows. Whether through a carbon tax or a cap and trade system, the price of fossil energy will rise until demand is sufficiently reduced to meet targets which would need to be stipulated. With a carbon tax the price rise goes into public coffers, with a cap and trade system the price rise goes into corporate profits. A more environmentally friendly and equitable system, which a friend of mine in the Greens, Richard Corin, has proposed, is a Fossil Fuels Tax (FFT), which is like a carbon tax and is imposed on those who burn fossil fuels. For equity purposes, the revenue from the tax is not kept by the government but rebated back to citizens equally. The biggest polluters pay the biggest FFT, the atmosphere is not privatised -- we all own the atmosphere! -- and consumers have the incentive to opt for green (environmentally sustainable and renewable) goods and services because the goods and services become relatively more affordable as the tax is increased in order to wean business and people off the use of fossil fuels. Fossil energy still becomes more expensive, but the rebate provides cash to invest in reducing energy bills through efficient appliances, solar hot water and the like. Demand reduction through efficiency and reduction of waste is the most cost effective means of reducing CO2 emissions. If the price of energy rises without a rebate, many people will not be able to afford to invest in better technology - it will trap more people into poverty with high energy bills, unable to afford to do anything about it. Carbon polluting businesses are keen on the "cap and trade" system because it is very profitable for them. They have to reduce their emissions one way or another for us to achieve sustainability, if that is still possible, but they get given rights to pollute and these rights can be traded to make money. However, their rights under a "cap 'n' trade" scheme (carbon emissions trading scheme) are effectively business assets, which can be bought and sold like any business asset. Consumers are forced to bear the cost of such a system because, as the carbon polluters are forced to cap their emissions further, the polluting producers pass onto the consumer the increased cost of having to produce their goods and services by greener methods. You can also read George Monbiotīs article Selling Indulgences on how "the trade in carbon offsets is an excuse for business as usual". Mark Andrews mark@devfeas.com.au |