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Global warming and climate change are major areas of concern for all countries today. Global carbon emission trading is one of the proposed methods of reducing carbon pollution hence global warming. In this system, Environmental Protection Agencies determine the permissible level of carbon emissions then issue pollution credits to deserving companies.
The permissible level is determined based on carbon emission estimates produced by the companies in question. The trick with these credits is that they companies can be sell or buy them. This means the highest bidder can acquire most credits.
Currently, companies can trade these credits amongst themselves in the European Union. However, in Japan and Korea, companies can trade the credits within the countries under the Kyoto Protocol. This paper seeks to examine the economics of Carbon Emission Trading. We examine both the positive and negative sides. In the conclusion, a position is taken regarding this issue.
Pros and Cons of Global Carbon Emission Trading
The case study’s author advocates for global carbon emission trading. He considers it an efficient way to reduce carbon emissions while having little impact on the economy. The writer notes the rapid growth in the market for these carbon emission credits. The article proposes that the fact that the credits can be traded enables reduction in pollution at cheap costs.
This is because companies whose cost of reducing emissions is high can purchase the credits from companies whose cost of reducing emissions is low (MIT, 2011). This saves the earth from global warming while simultaneously reducing operating costs for companies.
Unfortunately, the article fails to consider the negative impact of such trading. If carbon emission trading is adopted on a worldwide scale, it is highly likely that poor companies in poor countries will sell all their credits to rich companies in the developed world. This trend is already evident in large companies purchasing emission credits from smaller companies. Therefore, the large company continues to pollute the environment because it can afford the credits. Global Carbon Emission Trading will enhance this impunity.
Several weaknesses in the measurement of carbon emission bring to question the usefulness of emission trading. One is the fact that there is no independent body to measure companies’ carbon emission (BBC News, 2011). The Environmental Protection Agencies rely on data provided by companies in issuing the credits.
This creates an opportunity for companies to overstate their emissions in order to obtain more credits, which they can sell in future. Secondly, measurement of carbon emissions is quite subjective. There is no standard measure for emissions. Therefore, there is no concrete way of establishing whether the data is correct or not.
Advocates of Global carbon Emission trading argue that controlling pollution should be left to the free market. Unfortunately, this market is skewed in favour of corporate with power and money. Therefore, the market is neither objective nor fair.
The idea behind global carbon emission trading is a noble one. It aims at reducing carbon emissions globally at minimal cost to companies (Fankhauser, 2011). The policy results in markets for carbon emission credits. The intention is that the companies that need the credits the most get them. However, policy makers need to consider the qualitative costs too. Global carbon emission trading is likely to result in highly polluted poor countries. This is because companies in these countries would trade their emission credits to the highest bidder.
The disadvantages of global carbon emission trading outweigh the benefits. Therefore, I conclude that this is not such a good idea.
BBC News. (2011, June 6). Obscenity of Carbon Trading [Press Release]. Retrieved from The Green Room: http://news.bbc.co.uk/2/hi/science/nature/6132826.stm
Fankhauser, S. (2011). Carbon Trading: A Good Idea Is Going Through a Bad Patch. The European Financial Review, 32-35.
MIT. (2011, November 5). Carbon Emissions Trading in Europe [Press Release]. Retrieved from MIT Energy Initiatives: http://energy.mit.edu/