Cap and trade is an idea that comes mostly from the mind of a former University of Chicago economist by the name of Ronald H. Coase whose 1960 paper titled "The Problem of Social Cost" eventually would win him the 1991 Riksbank (Nobel) Prize in economics. In a nutshell, cap and trade is an idea that replaces strict regulation of emissions with a flexible scheme that would set an overall total for carbon output but would allow the "wisdom of the markets" to set the strategy for achieving those goals.
The Lucrative Business of Polluting
Will Trading System Encourage Emissions?
By Nils Klawitter 12/30/2010
The Kyoto Protocol's Clean Development Mechanism allows companies to continue polluting at home by assisting in emissions reductions abroad. If its critics are right, however, the system is being massively abused and actually discourages reductions that might otherwise be made.
Nearly all European industrial companies emitting environmentally harmful greenhouse gases are required to purchase emissions certificates if they don't reduce the amount of CO2 they pump into the atmosphere. Even so, they always have another option: They can simply buy their way out and keep on doing exactly as they've always done as long as they pay for climate-protection measures somewhere else in the world.
This selling of environmental indulgences is known as the Clean Development Mechanism (CDM) -- and it is probably the most useless aspect of climate legislation to be found. CDM projects are meant to make it possible for industrialized countries to fulfill a portion of their required emissions reductions in developing and newly industrialized countries -- and at a considerably lower cost. Using this method, German companies can compensate for roughly 20 percent of their emissions.
Companies can invest in environmentally friendly hydroelectric power plants in China or India, for example, or in facilities for extracting methane gas. However, many of these operations had already been planned before the German companies stepped into the picture. And while the law stipulates that only new projects will be supported through CDM, it's not always easy to determine exactly what qualifies as new. more
Dealing in Hot Air
The Pitfalls of Europe's New Emissions Trading System
By Alexander Jung 12/30/2010
The next stage in the world's CO2 emissions-trading scheme will begin in two years. Everyone agrees that the rulebook is complicated and that the costs for industry will be enormous. But nobody knows if the system will really help the environment -- or merely create a burdensome bureaucracy.
Peter Scur used to spend a lot of time outdoors, converting old quarries into fertile habitats and making sure that bats remained undisturbed while making their nests in limestone caverns. It was the sort of effort one might expect from the environmental officer at a cement company.
Overburdened by paperwork these days, Scur doesn't have much time left for such activities.
Scur, a tall man with strong hands, is sitting in his office at a plant belonging to the German unit of Mexican cement-maker Cemex in Rüdersdorf, 30 kilometers (19 miles) east of Berlin, poring over files marked "CO2," or carbon dioxide.
"We are being literally inundated with laws," he says. Scur has no choice but to address the new regulations.
Now that he is the company's so-called carbon manager, Scur has to be prepared for a new era that is about to begin, not only for Cemex and the cement sector, but also for the rest of German industry. more