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Topic 15: Carbon emissions trading: How viable?

Samuel Bamkefa's picture

In order to control the emission of greenhouse gases, a number of initiatives have been brought up internationally. One of these is carbon trading in its various dimensions. This blog is to discuss the insights and issued associated with this initiative.

Posts along this line are welcome

Samuel Bamkefa

Comments

Samuel Bamkefa's picture


In an effort to reduce the emission of greenhouse gases, an agreement
formalised at the Kyoto Protocol gave rise to the carbon credit trading.
Explained in simple terms, companies that produce (or intend to
produce) carbon dioxide above their allocated quotas are required to pay
for the excess quantity that they are emitting. On the other hand,
companies that engage in environment-friendly processes will have carbon
credit units to sell, getting paid indirectly by those who pay for the
emissions that they generate. For trading purposes, one credit is taken
as equal to one metric ton emissions of CO2.


In principle, this system provides a good means of discouraging
emissions through financial penalties while rewarding reduced emissions
by allocation of credits which in turn holds financial potentials.


Not too much can be said as drawbacks to the initiation but it is
suggested the price for a carbon credit should be make high enough to
really make whatever profit may be realised from using increased
emissions to be lower than the amount to be paid for buying credits.


Carbon offsets (variant of carbon trading) have their own drawbacks,
which reflect a fast-growing and unregulated market [1]. Hence, more
regulation needs to be put in the market to provide a level playing
field


Lastly, companies have to be monitored to ensure that they do not
indiscriminately pass the cost of the carbon emissions to their
customers and make outrageous profits based on this.


 


References
1.    Jessica Stillman. What is carbon credit?  Moneywatch, Feb 5, 2008. http://www.cbsnews.com/8301-505125_162-51187036/what-is-carbon-credit/
 


Samuel Bamkefa

Good study Samuel, although I beg to differ in the area of
companies paying for excessive emission act. What price can curtail the effect
of green house gases on the planet earth? These effects are currently been felt
and are increasingly alarming, causing more of natural disasters. Death number
at an increasing rate in USA due to unbearable heat, famine in some part of
Africa, etc.  Pollution of carbon and sulphur oxide must be drastically
reduced. Considering the automobile industry, invention of carbon catalytic
converter has been really helpful in western world. This is just a little
fractional result out of many generated industry we have all over the world. I
will like to say, government regulations needs to be more standardised in
pollution emission. The crusade need to be farther than the wall shore of
western country and must reach the high populated areas of Asia and Africa,
given full sensitisation.

Carbon trading, is a good
start, but must companies pay to destroy our planet !

 

Adedeji KUYE. 

Brenda Amanda's picture

I would like to agree with Adedeji. Money can solve lots of
problems but I’m not sure this is one of them. The topic of handling green
house gas emissions is a tricky one and the solutions that have been proposed
are pretty much ‘trial and error’. Carbon emissions trading in its current form
can be argued is to ‘make the rich richer…’. The reason is that the rich
industrial economies will continue to emit CO2  and simply sell off their responsibility to
the not-so-wealthy nations especially in Africa. Carbon emissions affect the
whole planet so we need to look beyond who can pay up for their emissions to
solutions that will benefit the whole planet; not just financially for a few
countries; but a solution that will see a considerable reduction in the carbon
emissions if we are to achieve the pre-industrial greenhouse gas levels by 2050
as is the Kyoto Protocol plan.

Ber_Mar's picture

Brenda thank you for bringin this idea, the problem with carbon market is that we assume is the same for diferent economies, which in fact we cannot. We cannot ask a country not to produce CO2 when its children are dying of malnutrition, what we can do is take the CO2 market, and instead of being just for expenditure, consider capture. Why should brazil mantain amazonia, for the World, if for the country it would be more profitable to build just farms. This is where the real problem kicks in, why not ask the USA to plant an Amazonia Florest inside. -Therefore i believe the only viable solution is to create C02 market which takes into accounts inputs (forests) and outputs (pollutions), economic standards and government policies. Only by then it would be possible to have a just system, the problem is that there is no real power in the UN, therefore the planet cannot speak as one voice. As seen last week important players like USA CANADA JAPAN Russia didnt even agree to sign kyoto protocol... What planet will we leave for our kids and grandsons if man is greed is so great that it cannot even respect its house!

Oluwatosin A. Oyebade's picture

Good points Adedeji and Brenda but lets look at it from the job and wealth creation perspective.

The ever rising challenge from contamination from industrialization and population outburst has made C02 gas pollution a major issue to contend with. The high demand for fossil fuels, which is a significant energy source worldwide, contributes largely to these carbon emissions. Despite the yearnings for renewable energy and other non-fossil fuel energy sources, we can't ignore the fact that oil and gas still remain the main sources of energy worldwide.

Although severa climate change migigation techniques (e.g: Nuclear power, switching to low carbon fuels, renewable energy, Carbon capture and storage (CCS), enhancement of biological sinks) have been proposed, and some are already being implemented, the fact stil remains that GHG emissions is inevitable for now until an efficient method of removing C02 is obtained. therefore, carbon trading (i.e: making the emitting companies pay for their damages) is a good way of alleviating, if not eliminating this quagmire.

Or would we rather have them get away with the carbon mess they create on a daily basis? The lease they could do is pay for their deeds and have the money channelled towards the companies that research and implement techiniques for eradicating the environmental mess created, thus shaking a suitable, albeit temporary balance in the energy and ecosystem. In addition, this cycle offunds serves to increase the investment into the mitigation techniques, luring more investors into the business of battling and capturing C02 emissions, making it a profitable endeavour.

This continuous cycle will trigger job creation and also create a momentary bandage to the problem at hand; a win-win situation for the parties involved.

Oluwatosin Oyebade

Oil and Gas Engineering

Kwadwo Boateng Aniagyei's picture


I would want to believe that carbon emissions’ trading
wasn’t instituted to create jobs and wealth. If it is so then our sense of direction
has been misguided and we are therefore looking at a wrong way of mitigating
the world’s greenhouse gases emissions. However; this is primarily a way of controlling
pollution by providing economic incentives for achieving reductions in the
emissions of pollutants. Emissions trading works by setting a quantitative
limit on the emissions produced by emitters and emitters who breach this rule
are made to pay fines covering the amount of excess emissions they have caused.
With the commitment of all the participating countries; there can be a "stabilisation
of greenhouse gas concentrations in the atmosphere at a level that would
prevent dangerous anthropogenic interference with the climate system;" which
is the main aim of the Kyoto Protocol.


 No amount of jobs or
wealth created can compensate for the adverse effects of the greenhouse gases emissions.
Even if it were so; how do the affected masses really benefit from these gains?
I somewhat agree to your view that emissions trading serves as a tool for job
and wealth creation; but this I believe is not the motivation behind the inception
of the emissions trading but rather creating a safe environment for habitation.


References


http://en.wikipedia.org/wiki/Kyoto_Protocol


http://en.wikipedia.org/wiki/Carbon_emission_trading

Emmanuel Mbata's picture

You have a point Adedeji, but you have to understand that carbon trading is not about companies paying so tha they can emit as much green house gases as they can afford.

It is a market based tool to limit green house gases, it trades emissions under the cap and trade schemes or with credits that pay for or offset green house gases reduction. A cap is set on allowable emissions, then emissions allowances that total the cap is distributed or auctioned off. so member firms that do not have enough allowances to cover their emissions must either make reductions or buy another firms spare credit and also members with spare or extra allowances can sell theirs, but the total emissions can not exceed the caps allowance. That way companies are forced to reduce the emissions to their allowance level.

Ikechukwu Onyegiri's picture

I think what Samuel didn't state well was the procedure to emission trading. Taking a view from the European Union Emissions Trading Scheme (EU ETS) used by over 11,00 factories which has been running since 2005 we can see that unlike what you think Samuel meant by paying for your emissions,  what he was meant to say was that each company is given emission credits which translate to their acceptable CO2 emissions. If for any reason a company surpasses this limit then it can then buy trading credits from another company which has still got a quota to reaching their emission limit. So in the sense of this the amount of CO2 emitted is kept regulated and as Tosin said in the comment below carbon emission trading becomes a revenue generator.

Though the setbacks I see in such a trading scheme is that the world is seeking to reduce emissions and not maintain it. With this initiative the corruption in the assessment and purchasing of emission credits will emanate as companies will find it very hard to strike a balance between going green and making a wholesome profit. The EU ETS was amended in 2008 to further constrain the conditions of trading by breaking emission quotas by region. This the EU commission says has cut down greenhouse gas emissions by big emitters by an average of more than 17,000 tonnes per installation from 2005 to 2012 (more than 8% decrease).

In my opinion carbon trading should be widely embraced especially in developing countries as it serves as a self check for industries.

[1] Ellerman A. Denny; Buchner Barbara (January 2007). "The European Union Emissions Trading Scheme: Origins, Allocation and Early Results"

 

Ikechukwu Onyegiri

Msc Oil and Gas Engineering

Marinos Ioannou's picture

I agree with you Samuel, that the Kyoto Protocol was
an attempt to reduce the gas emissions in order to control the greenhouse
effect. What I would like to comment is that to legalize the protocol there
where many years of debate between scientists, leaders and politicians. Finally
it became an international law on 2005 and it is the first legal contract that
aims the controlling and reduction of the greenhouse effect [1]. My concern, as
I posted in another blog, is that this protocol might have a good aim as the
majority should believe, but it might need a review. What I noticed is that
this protocol limited 6 greenhouse gases including CO2. What it does not limit
is NF3 which is used in many high-tech applications like LCD screens and Photovoltaic
[2]. So why are we trying to control and limit CO2 and just leave other more
hazardous compounds to be used. My opinion is that legislation about any
harmful materials either gas, liquid or solids must apply in order to prevent
non desirable results.  

[1]http://www.bbc.co.uk/climate/policies/kyoto.shtml

[2]http://www.ghgprotocol.org 

Marinos Ioannou

Toby Stephen's picture

Agree with Marinos that the Kyoto Protocol should by systematically reviewed in order to both ensure compliance as well as potential addition of pollutants. It will be interesting to see what happens at the end of this year when the first phase of the protocol is finished and who remains committed. As the only international agreement aimed at reducing greenhouse emissions I question how comprehensive it is at present given that Canada has already withdrawn, Japan and Russia have stated they won't commit beyond 2012 and the United States withdrew under the Bush administration to tackle climate change in other ways [1].

In addition, China, India and Brazil are all exempt as they 'weren't responsible' for the current predicament. Given the lack of involvement or exemption of these countries and the figure below (only the top half, 'emissions by country' is relevant to the point I'm making), it wouldn't seem very comprehensive if 6 of the top 7 global emitters aren't involved. This of course depends on these countries' individual pollution targets (ie whether or not they are better/worse than Kyoto targets) but regardless, a 'Global' energy treaty surely has to be all or nothing?   

Figure 1: Greenhouse emissions by country and per capita (taken from [2])  

[1] - http://knowledge.allianz.com/climate/agenda/?1741/climate-change-policy-...

[2] - http://www.abc.net.au/news/specials/climate-change/emissions/ 

--

Toby Stephen
MSc Oil & Gas Engineering

chukwuemeka uzukwu's picture


The ongoing process of changes in the global climate
system is rather undisputed these days, as it is evident from observations of
increases in global average air and ocean temperatures, widespread melting of
snow and ice as well as rising global sea levels. Moreover, while the exact
causes for the currently observed increases in global temperatures are yet to
be established, a growing consensus is emerging that at least part of it is
human caused


Various companies are trying to restructure their
operations in order to reduce waste and to make their processes more energy
efficient. A number of governments are enacting policies to replace CO2-intensive
energy, released through the burning of coal, oil and gas by more
environmentally friendly, so-called ‘clean’ energy, such as wind, solar, or
hydroelectric power.


 


 Global concern
over climate change has prompted countries around the world to offer incentives
to companies and investors who develop and participate in carbon credits and
other emissions trading programs. As regulatory schemes evolve and commodity
prices fluctuate, it is essential to stay abreast of developments to structure
proactive, financially viable strategies to capitalize on these opportunities.


The EU Emissions Trading Scheme (EU ETS) is based on the
recognition that creating a price for carbon emissions is the most
cost-effective way to achieve the deep reductions in global GHG(green house
gas) emissions that are needed to prevent climate change from reaching dangerous
levels


The Emissions trading scheme is not a
viable option to reduce pollution in the World especially the developed
countries as there is no guarantee enterprises will invest in carbon free
alternatives.


One justification of why the Emissions trading scheme is not a
viable option to reduce pollution is the ability for businesses to transfer
costs to consumers rather than attempting to reduce pollution output. Businesses
will obviously consider handing on any extra incurred costs to consumers,
especially seeing that in many cases it would be both simpler and more cost
effective than to invest into carbon free or lower emission options.


It is difficult
to assess the exact results of carbon offsets given the fact that they are a
relatively new form of carbon reduction, and it is possible that some carbon
offset purchases are made in an attempt to increase positive business public
relations rather than to help solve the issue of greenhouse gas emissions.


Offset projects
may also have negative social impacts, for example when local residents are
evicted to enable a National Park to be marketed as a carbon offset





Read more:
http://www.americanessays.com/study-aids/free-essays/communications/viable-way-to-reduce-pollution.php#ixzz28tjvCyid


http://www.grin.com/en/e-book/115372/carbon-credits-and-global-emissions-trading?partnerid=googlebooks


http://www.dlapiper.com/files/upload/Emissions_Trading.pdf


Kii Cajetan Barisi's picture

In response to global warming and growing emission levels countries have
shown great concern to make efforts to reduce emissions. Under the Koyoto
Protocol countries with higher level of emissions have developed a mechanism
to buy credits from countries with low emissions. High levels of polluters are
issued allowances by their national governments to cut down emission equal to
the value of allowances issued. They are either to abate the emissions or to sell
these allowances to companies or countries with low emissions, whichever is
cheaper. The Emission Trading seems to be simple and a breakthrough in
combating environmental problem but the mechanics of the trading are neither
simple nor leading towards the right solution rather developed a trade scenario
in which banks, derivative market players, speculators, brokers all are making
their way to earn huge profits. This all is making the environmental problem
worse. Alternate choices and methods are yet to be tested to run this trade with
different parameters and instruments; one among them is the viability of Islamic
financial instruments. The following study has given a critical review of the
trading system based on western economic system, and highlighted the idea of
introducing the Islamic financial instruments in the market of emission trading.
There is a great scope for Islamic banks and financial industry to invest in
carbon allowances, issue Sukuk bonds against the value of projects designed for
Clean Development Mechanism, start Ijarah for abatement equipment and
Musharika in Joint Implementation Projects. The study emphasized the need for
an initiative for a carbon market based on Shariah compliant financial
instruments and suggested a big push to launch the program to its fullest.

Reference
http://www.americanessays.com/study-aids/free-essays/communications/viab....
http://www.abc.net.au/news/specials/climate-change/emissions/

Kii Cajetan Barisi's picture

On August 28th, Australia and the European Union agreed to fully integrate their respective cap and trade schemes by 2018. Also, Australia has decided to drop its planned A$15 per tonne carbon credit floor price. The combined effect is that cheaper EU carbon credits will be available for Australian emitters. Under the integrated scheme, Australian business will be able to source 50% of their carbon liabilities from the EU, starting 2015. A similar allowance will be available for European emitters by 2018.
This is a welcome announcement for the EU trading scheme. Problems with oversupply have driven the cost of carbon credits to record lows. Currently, EU carbon trades at around US$10 per tonne. Opening the market to Australian demand should alleviate this oversupply. With a carbon tax fixed at A$23 per tonne, Australian emitters are welcoming the integration which will offer them a cheaper alternative to the relatively high tax. However, the Australian government is standing by its projections that carbon prices will reach A$29 per tonne by 2015 and 2016.
This formation of an international carbon trading bloc is of interest to other jurisdictions considering a carbon trading scheme, including Canada. If successful, it could serve as the model for other nascent international and regional cap and trade blocs, such as the Western Climate Initiative between California, BC, Manitoba, Ontario and Quebec.

Referenceshttp://www.dlapiper.com/files/upload/Emissions_Trading.pdf
http://knowledge.allianz.com/climate

Kii Cajetan Barisi's picture

Recent developments in international carbon finance have seen investors and carbon intermediaries moving away from the global carbon market and towards local initiatives, such asregional carbon trading regimes, as a means of participating in carbon reduction financing or achieving climate change objectives. This short piece identifies and begins to examine this trend away from global carbon market development and towards regional initiatives and some of the reasons for this movement.
At the 1997 climate change conference in Kyoto, Japan, 193 nations, including the European Union (EU), arrived at a global consensus on using financial measures to combat climate change. The Kyoto plan introduced restrictions on greenhouse gas (GHG) emissions by industrialized countries and the creation of credits to emit GHGs that would be tradeable in a global carbon market. Developing countries, including China and India, were not given GHG emissions limits and could sell credits based on their own GHG emission reductions to industrialized nations. When the Kyoto commitments entered into force in 2005 and, as a result, became a binding international commitment, they were taken up in earnest by the EU and were made mandatory under the EU Emissions Trading Scheme (ETS). An emissions trading system has the advantage of allowing companies to choose the most cost-effective means to achieve GHG emission reduction targets by either purchasing allowances or decreasing emissions.

victor.adukwu's picture





Carbon
emissions trading: How viable?


Carbon emissions trading or cap-and-trade
is a market-based approach used to control pollution
by providing economic
incentives
for achieving reductions in the emissions of pollutants.
A central authority (usually a governmental
body) sets a limit or cap on the amount of a pollutant that may be
emitted. The limit or cap is allocated or sold to firms in the form of
emissions permits which, represent the right to emit or discharge a specific
volume of the specified pollutant. Firms are required to hold a number of
permits (or allowances or carbon
credits
) equivalent to their emissions. The total number of permits
cannot exceed the cap, limiting total emissions to that level. Firms that need
to increase their volume of emissions must buy permits from those who require
fewer permits.


The transfer of permits is referred to as a trade. In effect, the
buyer is paying a charge for polluting, while the seller is being rewarded for
having reduced emissions. Thus, in theory, those who can reduce emissions most
cheaply will do so, achieving the pollution reduction at the lowest cost to
society.


The viability of Carbon emissions trading is relative. In developed world
like in the EU countries, the Carbon emissions trading has worked to some extent
before the economic meltdown and later dropped drastically from 35 to 9 euro.
In countries like China, India and some other Asian countries with a huge
population, it would be very difficult for this type of trading to work out on
appreciable rate.    


Reference:


 http://www.buzzle.com/articles/what-is-the-difference-between-global-dimming-and-global-warming.html


Frixos Karletides's picture


Heat energy
that is emitted by sun towards Earth is often reradiated back to the space.
Greenhouse gases have the ability to absorb this energy and emit it to all
direction including towards Earth. This has a result of significant temperature
rise of Earth. Some of the greenhouse gases are methane, ozone, carbon
monoxide, carbon dioxide and nitrous oxide. This is called the greenhouse
effect and future predictions embrace widespread ecological changes in
agricultural production and rising sea levels. In December 1997, 180 countries
signed Kyoto Protocol in Japan. It quoted that their industries should reduce
their greenhouse emissions by 5.2 % during the years 2008 – 2012. Carbon is an
element that is stored in fuels and oils and produces a greenhouse gas, carbon
dioxide on burning. Fuel burning is one of the major sources of greenhouse
gases. An industry method that can be used to limit greenhouse gas emissions is
carbon trading. A country’s government sets an allowable limit of gas emissions.
It then distributes allowances throughout the various companies that total this
limit. If a company does not have enough allowances, it must reduce their gas
emissions or buy spare allowances form another one. The price of allowances is
not always a standard value. It is within a certain range as a function of
supply and demand. This system appeared as a reasonable method to decrease
greenhouse emissions, however, critics of the idea suspect that some countries
may exploit the system and the results will be negative. The concentrations of
carbon have risen intensely and the Earth’s temperature is about 34°C warmer as
a result.              


Frixos Karletides

http://science.org.au/nova/054/054key.html


http://science.howstuffworks.com/environmental/green-science/carbon-trading.htm


Kyeyune Joseph's picture


Carbon
emissions trading is a market based strategy used to control carbon emissions
by providing economic incentives for achieved target emissions  reductions [1]. Trading can be
between companies as well as countries. This approach came out of the Kyoto
Protocol of 1997. It offers pollution rights to companies as well countries.
Pollution rights are bought and sold between emitters of pollution [2].
Emission caps (targets) are set by regulators and can be sold to companies.
Once these levels are exceeded, the concerned company has to buy from others
that haven’t exceeded their caps. Likewise countries in the developed world can
employ cleaner energy projects such as wind and wave energy and then seek for
certification for reduced pollution. If reduced pollution is verified, emission
reduction units can then be bought or sold among developed countries. The
approach has received support especially in the European Union (EU) and some States
in USA. At the moment, the EU has a large carbon emission trading system
covering industries like cement, glass, iron and steel and a few others.


Why it will be Viable?


The
approach will stimulate investments in low carbon technologies in industries
like construction and power generation. Large firms will lead initiatives in
reduction of carbon emissions so as to meet their targets.  However, investments will be determined by
policy regimes, emission targets and company size.


Carbon
emissions trading will be viable and can be likened to the cap and trade system
of SO2 in the USA that helped in reducing acid rain. However,
success is hinged on support from developing and developed world. The EU has
already set the pace for this support.


Why approach may not be viable?

Large
firms have the option of reducing production so as to meet emission targets or
go on and produce and pay for extra emissions. This alone calls for stricter
regulations and enforcement. After all at the end of the day, the end user of
the product will pay for any additional cost overruns including that of emission!

Low
carbon technologies such as pre-combustion and post combustion carbon removal
are still expensive for small firms. This means they will not fully embrace the
approach since it will limit their production. Achieving the set caps may put
them out of business.

Apart
from the EU that has unconditionally agreed to reduce its carbon levels to 20%
below the 1990 levels by 2020, none of the other industrialised countries has
shown serious commitment in this regard.

However,
despite the above setbacks, I believe the approach can be a success if the
following measures are put in place. They include:

Combining
the approach with carbon tax can ensure stricter adherence. Carbon tax is
levied on carbon content in fossil fuel and is meant to encourage fuel users to
seek cleaner sources of fuel. Having the two operate hand in hand may be
beneficial.

Making
acquisition of carbon credits quite an expensive venture. This will try to
limit the big polluters thus they will either lower their production or employ
low carbon technologies. Otherwise, the current system simply rewards them with
an option of causing more pollution instead of stopping it since regulations
are not very strict.

In
summary, the approach can be viable despite the limitations it has and can provide
an avenue to reduce emissions in order to reduce global warming.

References

[1] Jiang, x. & Cui, Q. 2012,
"Carbon Policy and Its Impact on Construction Firms", Carbon
Management Technology Conference.
Carbon Management Technology Conference,
Orlando, Florida, USA, 7-9 February 2012. Carbon Management Technology Conference,
CMTC 151721. Available at one petro

[2] Deatherage, Scott 2008,
"Monetizing Reductions In Greenhouse Gas Emissions: Opportunities In
Carbon Credit Markets", World Petroleum Congress, Spain.  29 June-3 July 2008.world petroleum council
conference paper, 19-0965. Available at one petro.

 


Elle Allswell David's picture

Carbon emissions trading is a form of emissions trading that specifically targets Carbon dioxide calculated in tonnes of Carbon dioxide equivalent and it currently constitutes the bulk of emissions trading.

This method of trading is done as a result of Koyoto Protocol ( that is they want to reduce their Carbon emission to their by reducing Green House Gases GHG ).

Carbon Emission market is growing rapidly and there is stong evidence that the market is expected to expand significantly in the near feature and participants consider that certain emission trading markets are already functioning well. The largest of the markets are in the EU despite some teething problems.

Just like every other business, it has its own challenges which must be tackled. Transperency is seen by many participants as a foundation stone for for building market confidence. There is need for openess of available data to participants as this will improve and build market confidence.

From my research I discovered that the Carbon Emissions trading  market has experienced rapid growth and as such I think is a viable market. 

 

References:

1. The emissions trading Market: Risks and Challenges ( Jonathan Hill, etal ) 

Monday Michael's picture

Carbon emission trading is a market-based approach used to control the emission of greenhouse gases such as carbon dioxide. Organisations or firms that are able to reduce their emission of carbon dioxide and other greenhouse gases are rewarded with economic incentives or carbon credits which they can sell to organizations or firms that are unable to reduce their emissions. The whole essence of this type trading is to reduce the quantity of carbon dioxide released into the atmosphere thereby mitigating the effect of climate change [1]. The CO2 obligations are those set at the United Nations Framework Convention on Climate Change in Kyoto in 1997, popularly known as the Kyoto Protocol [1]
Laudable as carbon trading seem to be, it is still fraught with lots of criticism. One such criticism is green protectionism; a situation whereby developing countries, with limited financial resources, are unable develop environmentally-friendly industrial infrastructure in order to meet their carbon emission caps. Developing countries such as China and India view the blocking of their exports to Europe and the USA (which by the way is yet to sign the Kyoto treaty) or higher taxes on commodities from developing countries under the guise of not being environmentally friendly as a deliberate ploy to curtail their economic growth [2].
From the foregoing, the whole concept of carbon trading is commendable as a means to reduce carbon dioxide emissions and consequently mitigate climate change but the many teething problems facing it, the major one being green protectionism, will first have to be resolved before we can say that it is viable and fair to both developed and developing nations alike.

REFERENCES
[1] http://en.wikipedia.org/wiki/Carbon_emission_trading
[2] http://mrzine.monthlyreview.org/2010/khor190410.html

Giorgos Hadjieleftheriou's picture

Carbon emissions
trading: How viable?

 

Burning gas, coal and oil to produce energy, carbon dioxide
is released into the atmosphere. Carbon dioxide is being absorbed by trees and
plants but because we are burning it so fast it is impossible for them to soak
it up. Deforestation is not the best way for helping vegetation to infuse the emissions.
Having this big amount of emissions in the atmosphere, climate change is produced
also known as global warming. There are several ways to avoid large emission
quantities but it will not disappeared it will only reduce them. One way is the
electricity production with renewable energy. Another way is the carbon capture
and storage which is new technology.

Emissions trading system is a program started by EU which
enforces companies (e.g. factories) to reduce emissions of carbon dioxide. At the
end of each year companies must submit enough allowance to cover all its
emissions or heavy fines is imposed. The number of allowances is reduced over
time so that total emissions fall. There must be a 20% reduction until 2020.

http://epa.gov/climatechange/ghgemissions/

http://ec.europa.eu/

 

SON CHANGHWAN's picture

Emission trading was one of flexible mechanism from Kyoto protocaol.[1] Each goverment set the baseline for each company in their countries and company can improve their performance in emission or buy emission credit unless they cannot achieve goal. The key for trade is appropriate value of commodity. If allowable emission is overestimated, the price of credit will be clahsed and hence nobody will make an effort for improvement in gas emission. Therefore, emission goal from government should be considered carefully.

Governmental goal should be discussed within international treaty, current kyoto protocal has a limited participant,major emission countries withdrawed. The purpose of emission trading is giving a flexible method on the way to decrease emission. If other admits the value of accomodity because of their restriction from treaty but the others are not, trading could not be existed in a long term view. Response from every country is never easy to be accomplished, numerous countires' support is essentially required. In other words, attracting participant to the market is required for making competitive system. And price should be maintained with the level which is forcing on market player to choose credit as a secondary option.  

 Ref:

[1]: http://en.wikipedia.org/wiki/Emissions_trading#Definitions

Regards,

SON, CHANG HWAN

Abdulazeez Bello's picture

 

 

The developed countries might be champions of
Industrialization but production of goods has shifted to developing and under-developing
countries in a bid to maximize profit through cheap local forces and less stringent
policies to comply with. One of such policies is the Kyoto protocol of 1997 in Japan
that introduces pollution (green house gases) trading. The content of which has
being well explained by previous contributors to this blog. Another challenge
is who monitors or enforce these inefficient treaties and abstract plans. One
of the bloggers, Mr Toby even stated that a number of industrialized countries
are either not exempted or had pulled out. The 2012 communicate in the united
nation conference on sustainable development held in Rio, Brazil in June this
year also fail to address the lingering issues affecting the climate and what
it came up with can best be defined as modest but nonbinding goals as
highlighted by one of the critic [1]. These are many more of its kind explains
how Developed countries view Industrialization and the challenges of Greenhouse
gas, GHG.

Reference
1.            http://www.uncsd2012.org/

Deinyefa S. Ebikeme's picture

The Kyoto protocol of
1997 on carbon emissions trading is a market based strategy used to control
carbon emissions by providing economic incentives for achieved target emissions
reductions on greenhouse gases
.


This
has led to greenhouse gases emitting industries looking for ways to mitigating
their greenhouse gases emitted with various technologies such as Carbon Capture
and Storage, EOR in oil and gas industries and others. Now CCS is being
considered as a viable technology in achieving this feat.
Also Research Institutes (IPCC, GCCSI,
IEA, CO2CRC) had complained on the low CO2 budgeting (so-called carbon credit)
by various regional governments over time in order to support the drive
to reducing the global average temperature and the sea-level change (GCCSI,
2012).


The
IPCC findings, show that total costs required over time (100 to
300years) for avoiding the global average temperature from rising beyond 2°C is
estimated to be around 3–4 per cent of a single year’s value of global economic
output (IPCC 2007b, Stern 2008).
This would
delay the increase in global prosperity by around a year over the medium to
long term. The total benefits of managing the risks of climate change are
estimated to be well in excess of this cost (Stern 2007).


In
conclusion, Climate change legislation policy for increase carbon credit
initiatives must not be delayed
 in order to instil confidence, encouraging more innovation,
and ultimately reducing capital and operating costs for various industries to
achieve emission reductions in the most efficient and effective
way. Governments should review their policies to ensure that CCS and
others can play a full part in the portfolio of low-carbon technologies.

References:            


IPCC, 2007a. Climate change 2007: Synthesis Report, contribution of Working Groups I, II and III to the fourth assessment
report of the Intergovernmental Panel on Climate Change [Pachauri, R.K and
Reisinger, A (eds.)]. IPCC, Geneva, Switzerland.


IPCC, 2007b. Contribution of
working group iii to the fourth assessment report of the intergovernmental
panel on climate change. [Metz, O.R Davidson, P.R Bosch, R Dave, L.A Meyer
(eds)]. Cambridge University Press, Cambridge, UK and New York, US.


"The
Global Status of CCS 2012
". Global CCS Institute (GCCSI, 2012).
http://www.globalccsinstitute.com/publications/global-status-ccs-2012.


Deinyefa Stephen
Ebikeme IBIYF


Richard Milne's picture

It has been only 7 years since the Kyoto greement was made. The first milestone is still to be reached and countries are still to report their findings. Undoubtedly, improvements can be made to he system, however, with a new system such as Carbon Emissions trading, there are always going to be loopholes and people taking advantage of them. Every fault cannot be taken account of, just like with this method of continuous assesment, we have already seen that our requirements have changed from 100 words minimum, to 500 words maximum, and that people are copying their posts from Wikipedia! This is proof that every system has teething problems when it is introduced.

However, even though there are teething problems, I feel that the Kyoto agreement has made leaps towards a reduction in Carbon Emissions, even if just by raising awareness. The increase in companies and political parties advertising and campaigning based on their 'green' credentials has been staggering since 2005. Even oil companies have gotten in on the act (see Exxon Mobil and their biofuels adverts). There is still a very long way to go, however, and the only way to do it is to hit the larger companies in the pocket, while not hitting the smaller ones or the consumers. This however, will be tricky and I do not relish the job of the politicians.

Could it be that each industry will require a different approach? Or that companies should be penalised for emissions over and above that of their rivals? Could allowable Carbon Emissions be linked to a companies operational expenditure/profit? Or could companies with the lowest emissions in their sector be given a bonus by the government, in much the same way that football clubs are given more money, the better they do?

Harrison Oluwaseyi's picture

From the late 19th century till date
the effects of global warming has become noticeable on the earth. Different
conferences, talks have suggested different techniques and methods to reduce
the amount of green house gases released into the atmosphere. One of these
numerous methods is carbon emission trading. This method was introduced in the
euro-zone, in 2005, the ideology was to give companies economic rewards for
reducing their carbon foot print or companies or giving companies quota levels
of the amount of green house gasses they are permitted to release into the
atmosphere over a period of time.

Over the years there have been
several arguments about the effectiveness of the trading system, the measures in
place to monitor the emission levels, the penalties in place for companies that
default, measuring the actual amount of emitted gases etc. Notwithstanding the
faults in this system, the carbon trading system still has a future role to
play in the reduction of green house gases released.

REFERENCES

1)      August
2010, Jutta Kill, Saskia Ozinga, Steven Pavett, Richard Wainwright, “Trading
Carbon: How it works and why it is controversial”.

2)      March
2008, Jonathan Hill, Thomas Jennings, Evie Vanezi, “The emissions trading
market: risks and challenges”.

Oluwasegun Onasanya's picture

Climate change is a complex problem, which, although environmental in nature, has consequences for all spheres of existense on our
planet. It either impacts on, or is impacted by global isues, including poverty, economic development, population growth, sustainable
development and resource management.
At the very heart of response to climate change, however, lies the need to reduce greenhouse emissions, of which carbon emissions is
included.

Carbon emissions trading, as set out in Article 17 of the Kyoto protocol, allows countries that have emissions units to spare-emissions
permitted them but not used-to sell this excess capacity to countries that are over their targets.
Thus a new commodity was created in the form of emission reductions or removals.

Since carbon dioxide is the principal greenhouse gas, people speak simply of trading in carbon. Carbon is now tracked and traded like any
other commodity and this is known as the Carbon Market.
More than actual emissions unit can be traded and sold under the Kyoto protocol's emissions trading scheme.

I personnaly agree that emission trading within the carbon market is very viable, especially if countries can align appropriately without
any deviation from the Kyoto protocol, by also enforcing companies to do likewise.


Reference:

Emissions Trading-Framework convention on climate change.
www.unfcc.int/kyoto_protocol

faizakhatri's picture

 During the past 20 years, several different approaches to capture and store of carbon have studied as potential climate change mitigation options. It can divided into three option (1) Biological storage (often known as biological carbon sequestration),(2) Ocean storage,(3) Geologic storage To be useful in climate change mitigation, it may be necessary to store the CO2 for hundreds of years until well past the end of fossil fuel these three methods are capable of capture of CO2 and work efficiently by 90% but carbon emission trading is required energy input and initial expenditure including cost of construction ,equipment and long term operation required  which need huge investment  If we can compare its challenges with its benefits we can see challenges are more than its advantage but it can be overcome with research and development of hazard and risk assessment of technology and socio economical factor per sue with better framework for example leakage risks from Carbon transportation and storage need further work but overall CCS is an effective tool for human health as well as environmental protection. Which is very attractive as it is a key part of strategy to cut down CO2 emission in Atmosphere in a global context CCS it is a mitigation way which helpful for converting the present fossil based energy system into a future sustainable energy system Faiza khatri M.Sc oil and gas engineering 

Sineenat Kruennumjai's picture


Discuss Topic 15; Carbon emissions trading: How viable?

Carbon emissions trading is the market for purchasing the allowance of carbon emissions. Each company receives the allowance for emit carbon dioxide (or its equivalent in other greenhouse gases). The companies that their emissions are below than their allowance (capped amount), they are allowed to sell the portions of residuum allowance to the companies that their emissions are higher than allowance. In my point of view, I think this scheme is not a viable option to reduce air pollution. This is because the sales of portion of allowances, which lower than capped amount, are permitted. The companies who emit carbon dioxide lower than their allowance; they might seem to be a positive outcome for reducing air pollution. Yet they can sell their residuum allowance to other business, and permit such business to produce more pollution. Consequence, the overall carbon emissions are not reduced.

Posted by
Sineenat Kruennumaji
Student ID 51126536

Refferences;
http://www.americanessays.com/study-aids/free-essays/communications/viable-way-to-reduce-pollution.php#ixzz2CCPuKKb5
http://useconomy.about.com/od/commoditiesmarketfaq/p/carbon_emission.htm

YAKUBU ABUBAKAR 51126107's picture

The concept of carbon emission trading which was mastermind
by the global highest CO2 emissions countries like china and united states
under KOYOTO PROTOCOL of 1997. Which state that countries with less carbon
emission can sell their quota/credit to the countries that produce more CO2. This
is totally not a viable way of radically reducing CO2 emission rather it encourages
the industrialise countries to continue to pollute the atmosphere because they
have the money to by credit from less industrialise countries like Pakistan or Austria.
A much heavier sanction need to be impose on any countries which fail to
reduced their emissions rate after a given period of time notice by the united
nations committee on environment/global warming would be a better way than carbon
emission trading.If  serious fines are
not given to the bigger countries like china and US they would be relauctant to
improve their emission and global warming would continue to have much effect on
all our lifes.

Yakubu Abubakar

Oil & gas engr.

Refeence:

http://conference.qfis.edu.qa/app/media/305

OKECHUKWU CHUKELU's picture

Carbon emissions trading creates a
market-based mechanism for companies to reduce their emissions by allowing them
to increase emissions by buying credits from less companies with less
pollution. This way there is a balance of the amount of carbon emissions. The
major attribute of carbon trading is that if well regulated, it will allow for
a collective reduction to a more acceptable level globally. Obviously this
would result in a reduction of the global warming effects and will also help
sustain the image of companies that are known to be major polluters. However
the problem facing carbon trading is that a global framework has yet to be
formulated. At the moment the trading happens in the international markets
making it tough for some regional businesses to follow.

Andreas Kokkinos's picture


Carbon emissions trading targets a market based approach of controlling
and reducing the pollution caused by these pollutant emissions. In 2005, the
European Union launched the EU Emissions Trading System (EU ETS) in order to
face the dramatic climate change of the recent years. Additionally, the EU
wanted to achieve that by reducing the industrial greenhouse gas emissions cost
effectively.

The EU ETS is based on the “cap and trade” principle which basically
means that a company should reduce greenhouse gases by selling them to other
companies who need them. From this EU ETS system it is estimated that by 2020
the emissions should be 21% lower than 2005.


[1] http://en.wikipedia.org/wiki/Emissions_trading

[2] http://ec.europa.eu/clima/policies/ets/index_en.htm


Andreas Kokkinos

MSc Oil and Gas Engineering

The upwarding trend of global warming threatens our planet and its species. The emission of carbon in to the air melt glaciers, changes the climate, causes loss of ecosystems and affects our health. For their part, a lot of people try to understand their footprint and change their habits to reduce carbon emission but it is undoubtedly clear that an economic solution to this problem plays more vital role. Carbon emission trading allocate credits to companies and countries with low or no carbon emission which they can sell to those with higher carbon emission. It is a policy to mitigate carbon emission by setting a cap. Cap is the maximum amount of carbon that is allowed to be emmitted. I believe it is a good market-based solution which can reduce carbon emission over time. For instance, gas emits lower GHG in comparison with coal. As a result, the permit price of coal is higher. So, for a power company, it would be cheaper if it used gas to generate electricity. In addition, in carbon emission trading credits are given to emission reduction projects and countries and companies that reduced their carbon emission. I reckon that carbon emission trading is a viable plan asince it encourages companies and countries to use environmentally cleaner and safer sources of energy generation. Such a policy can chang the future trend of energy mix to renewable and cleaner energies.

Sources:

www.carboncreditsfaq.com

www.science.howstuffworks.com

www.guardian.co.uk

amaka.ikeaka's picture

The greatest challenge facing the world is climatic change and ecological imbalance in the environment. In an effort to try mitigating this challenge, the carbon emission-trading scheme was introduced. This mechanism involves the use of economic incentives for achievement in the targeted carbon dioxide emission reduction. The overall aim of this scheme is to reduce green house emissions specifically carbon dioxide. The effectiveness of this scheme has been questioned as well as its financial advantage. Economically abundant countries would profit from the continuous purchase of carbon credits and carry on polluting the earth. Basically, the wealthy nations and companies trade carbon credits amongst themselves either between countries or companies.In addition, this scheme encourages major polluters to continue as ususal, while making the poor and disadvantaged to sell their rights to pollute. Though this idea is innovative and has its theoretical gains, it has been criticized as a mere distraction from the search for other solutions.

OKEKE FRANCIS's picture

As a business man, I can afford to emit more CO2 from increased production and as a result make more money to offset my carbon credit debt at a profit. Better still I can afford to artificially produce greenhouse gases and with my advanced technology, recycle it and gain carbon credits for sale. 

Can the Kyoto Protocol really help our deteriorating climate? The fight against climate change which led to this agreement has being left in the hands of the financial markets where profit making and not fighting climate change has become the main objective of the actors involved in this carbon trading. Interestingly, the US has refused to ratify this Kyoto treaty and China which is a big contributor of this greenhouse gases carries a no emissions-cutting under this treaty.  

According to Tamra Gilbertson and Oscar Reyes, in their book "Carbon Trading- How it works and why it fails", they clearly pointed out that carbon trading is a very recent invention by business and political elites that undermines environmental legislation and diverts from planning a rapid transition away from current fossil fuel expansion.  

If climate change is to be nipped in the bud, a paradigm shift from the idea of carbon trading to proper regulation based on ALARP must be implemented.

References

1. Tamra, G. et al. (2009). "Carbon Trading- How it works and why it fails".

2. http://www.guardian.co.uk/environment/2012/sep/10/global-carbon-trading-...

3. http://www.scientificamerican.com/article.cfm?id=carbon-credits-system-t...

4. http://www.clickgreen.org.uk/news/international-news/123743-europe-shoul...

 

OKEKE FRANCIS N.

OIL AND GAS ENGINEERING

Igwe Veronica Ifenyinwa's picture

It is a well known fact that environmental degradation has attained its heights and emission is still increasing at an alarming rate. Koyoto Protocol [1] has set limits for countries with high emissions and compels them to reduce within a specified time frame. The world has succeeded in developing a means to surmount this problem but unfortunately this system which is called Emission Trading system is invented by countries that have very high level of Green House Gas (GHG) emissions.

At first, this procedure seems to be very attractive and fruitful but in reality the emission is being off-set with those countries that have emission less than the allowed limit thus having no positive effects on the global environment. It is a high time to save the environment by developing alternative options rather than relying on this method.

[1] : http://unfccc.int/kyoto_protocol/items/2830.php

Oluwatadegbe Adesunloye Oyolola's picture

Even though the emissions market is small compared to many other commodities markets, it is growing at a rapid rate. Owing to its association with efforts to combat
climate change, the emissions market is very high profile and attracts considerable media attention.

Emissions reduction projects under Kyoto can take one of two forms:

A.  Joint Implementation (JI).

This is where an investor from a developed country finances an emissions reduction project in another developed country, and as a result receives Emission Reduction Units (ERU), which can, subject to limits, be submitted to meet an installation's emissions allowance in place of
the EU ETS
(European Union Emissions Trading Scheme).

B.  Clean Development Mechanism (CDM).

This is where an investor from an Annex B country finances
an emission reduction project in a non-Annex B (developing) country. The investor receives CER (Certified Emission Reduction) allowances that can be submitted in place of EUAs to meet an installation emission allowance in the
emissions reduction obligations.

Market potential

In terms of volume, there are a number of short to medium term anticipated growth drivers:

i.    EU ETS is expected to increase trading volumes as installations requiring permits enter the market to cover short positions.

ii.   As the market grows it is expected that there will be a change from the current estimated 50-50 split between trade and financial participants, with financial participants increasing their participation significantly to a similar level to other commodities markets, where financial, i.e. non-physical, participants can typically make up 90% of market transactions.

iii.   Emissions from aviation and shipping are not currently covered by the Kyoto protocol. Aviation emissions are expected to make up 4% of global emissions by 2050. Given the time needed to pass the necessary laws, it is expected that airlines will not be included in the emissions trading scheme, until 2011 at the earliest, even though it is not clear how tough allocations will be. The addition of these sectors to the cap-and-trade markets would generate significantly increased demand on the CDM, JI and ERU (check abbreviations above) projects and therefore additional trading liquidity.

Aside from growth drivers, many commentators believe that as the market develops, infrastructure and regulatory matters should themselves become refined, thereby stimulating higher overall standards. This would be expected to result in associated volume growth as the market attains lower perceived risk and as a result becomes attractive to a wider range of voluntary participants. Finally, the development of additional
trading venues and hoped for improved transparency should also make the market more attractive to a wider range of participants.

Reference:

www.iasplus.com/en/projects/project34

www.europeanenergyreview.eu/index.php?id=3691

Oluwatadegbe A.O

MSc Oil and Gas Engineering

eddy itamah's picture

Carbon emission trading is basically a form of permit which allows countries to utilize the kyoto protocol obligation which specifies the amount of carbon emission in tonnes that can be traded in an attempt to reduce carbondioxide emission which thus mitigate future climate change. This carbon emission trade under the cap and trade schemes is a popular way to regulate CO2 emission. This schemes generally begins by setting a cap on allowable emission, which it then distributes or auctions off emission allowance that total the cap. This therefore means that member firms that do not have enough allowance to cover their emission must either make reduction or buy another firm's credits to cover the emission.

It is apparent that the world is set to reducing its greenhouse gas emission effect, as this is evident in the current market trend in Europe which is believed to be the world's largest carbon market. This is believe to have prompted Australia plan to link its carbon trading scheme with the EU's, giving assess to firms to use European permits from mid - 2015 to emit carbon dioxide (CO2). Australia is known to be the world's developed highest CO2 emitter per head of population which now tax its polluters. Although the recent tax schemes introduced in Australia have attracted or trigger fierce opposition, it thus compels nearly 300 of the worst - polluting firms to pay a levy of $24 or A$23 for every tonne of greenhouse gases they produce. This EU deal is seen to have given australian firms more and flexible options for meeting their CO2 reduction targets, as this scheme between australia and EU is based on cap - and - trade which directly set emission caps for the biggest polluters, hence compelling them to but permits if they want to go above their emission targets.

 

Reference

www.bbc.co.uk/news/world-europe

science.howstuffworks.com/environmental/green-science/carbon - trading.htm  

eddy itamah's picture

It is a stark and frightening fact that inspite of the 20years of international effort which includes huge amount of time and energy expended on the kyoto protocol, and the economic cost, the rising effect of carbon emissions is even faster than they were in 1990. In the 90s, the increasing effect of carbon emission was 1.5parts per million (ppm) per year. This is believed to be 2ppm now. This goes to shows that the critical 400ppm global threshold is likely to be exceeded in a short time, if no measure is put in place to stop this rising trend in carbon emission.

This current situation have prompted two obvious fundamental questions, firstly, is how could so much effort lead to so little result and secondly is how could so much political capital and economic cost be expended to so little effect? Obviously, carbon consumption measure the carbon footprint which therefore defines its viability and not its carbon production in a particular geography areas. Unfortunately, the kyoto framework did not take consumption into account, but rather focuses on carbon production. This framework has lower the carbon production in europe, most specifically in the UK where carbon production fell by more than 15percent between 1990 and 2005. However, once carbon  imported is taken into account, carbon consumption will increase by more than 19%. This further explains why carbon production can be falling in europe in line with kyoto targets, and global carbon emissions keep on increasing. This brings us to the fact that unless people pay the cost of their pollution, they will not do much about it, and that production is best measured by carbon consumption, not carbon production. This process has led to the introduction of price (a tax) on carbon consumption, a carbon tax with border adjustments to ensure that imports of carbon - intensive goods from countries without a carbon price are treated on the same basis as domestic production.

Not to have a carbon price is an export subsidy and hence a distortion to trade. Making sure we have a level carbon - pricing  field is pro - trade and it enhances efficiency. Although this process might be complex, but it will certainly turn out that a small number of large, energy - intensive industries make up the bulk of the carbon trade and so in practice it will not require much to make a big difference to the outcome. This carbon consumption tax would inevitably comprise two basic elements, which are domestic tax on carbon, and a tax on carbon imports. This goes to show that if a serious carbon price can be introduced based upon carbon consumption, and we are able to get off the coal escalator into gas quickly, then the hope of not exceeding 500ppm threshold by 2050 will be a reality. But carrying on as we are, hoping kyoto will solve the problem is rather a wishfull thinking, since it carries a lot of cost for almost no benefit.

 

Reference

Deter Helm, professor of energy policy university of oxford, author of the carbon crunch: How we are getting climate change wrong and how to fix it. 

t01sik12's picture

I agree with Amaka Ekeika,

The impact of climate change is visible in different parts of the world and it is believed the rise in temperature of the earth has been causing devastating changes in the environment across the world resulting in unpredictable weather patterns and loss of crops. There are numerous economic problems which are part of global warming and it has also been observed that the major emitters of the world are not working in the direction to reduce the level of emissions[1].

Why Emission Trading?

 An emission trading system is a powerful policy instrument for managing industrial greenhouse gas (GHG) emissions. The presence of a trading system encourages operational excellence and provides an incentive and path for the deployment of new and existing technologies.

  The impact of excess emission of greenhouse gas can be seen in the health and the ecosystem. Reduced food grain production caused by change in climate has resulted in food grain shortage and a rise in the price of staple food grain.

The impact can be said to be change in natural environmental leading to creation of costs which can be direct cost or indirect such a social cost or financial loss caused by loss of crops, weather changes etc

There is high demand to control the level of emissions and form regulations which can prevent polluters from emitting excess amount of greenhouse gases. 

 

References

1. http://www.sooperarticles.com/business-articles/financial-management-articles/carbon-emission-trading-markets-carbon-reduction-scheme-1114891.html

Samuel .Kanu

Kwadwo Boateng Aniagyei's picture


Carbon emissions trading is one of the two crucial pillars supporting
Europe’s sustainable energy framework. The other is Carbon Capture and Storage
(CCS). These two go hand in hand and one cannot become a success without the
other. CCS which is the only technology that can push down the rate and amount
of emissions cannot be successful and mature without the economic incentives
provided in carbon emissions trading. Though so many people are pushing for alternative
renewable forms of energy; the renewable energy cannot provide for the global
energy demands and so the world still has to rely on fossil fuels. Hence a combined
application of emissions trading and CCS would go a long way in reducing the
amount of greenhouse gases that is released into the atmosphere.  Capturing and storing carbon
dioxide in empty oil and gas fields will make us produce greener fossil fuels. This
is a new challenge and opportunity for the oil and gas industry to make the
world free of greenhouse gases and global warming. With the obvious potential
of CCS; one will ask that why is it not happening on a large and commercial
scale. This is because it involves investments and operating costs but no
revenue generation. Hence with the price on greenhouse gases that is provided
through the emissions trading; CCS can become a reality if the funds accrued
through emissions trading are channeled into it. The close connection between
CCS and emissions trading exist but how fruitful this partnership is going to
be will depend on technological developments and policies.

References

http://www.onepetro.org/mslib/app/Preview.do?paperNumber=WPC-19-4961&societyCode=WPC

 


Dear Colleague,

It is noted that carbon trading is a good measure in reducing CO2 emission into the atmosphere. But similar to any trading, it is prone to fraudulent and manipulation for example: EU ETS lost around Euro 5 Billion due to carousel fraud in 2008 and 2009 [1]

 

“Spot prices vary with each transaction in the market and can change rapidly and unexpectedly with changes in information about supply and demand. So those involved in the market look for ways to reduce the risk of buying too high or selling too low, which is where hedging comes in. This is where dealers and brokers enter the picture with various buying and selling instruments, creating a derivatives market. It is here, in the complex world of swaps, options and futures, that the overwhelming majority of carbon permits and credits are traded.”

                                                         (Kill, J., Ozinga, S et al, 2010)

Speculators utilizing derivatives ( selling commodity at agreed prices before actually trading to reduce price drop in future) might cause a spike in carbon prices due to inconstant demand and/or liquidity (where future value increases rather than dropping)[2].

 

Lastly, in the absent of independent regulator, market linkages are difficult to govern. Therefore, softening in commitments under the linked trading system due to constants threat in variation of domestic circumstances. [3]

 

References:

1.Europol. (28 December 2010). Further Investigation Into VAT Fraud Linked to The Carbon Emission Trading System [Online].Available on https://www.europol.europa.eu/content/press/further-investigations-vat-fraud-linked-carbon-emissions-trading-system-641

[Accessed on 24 November 2012]

2. Kill, J., Ozinga, S., Pavett, S., and Wainwright, W. (2010). Trading Carbon : Hows it works and why it is controversial. Netherlands. Fern Publication

 http://www.fern.org/sites/fern.org/files/tradingcarbon_internet_FINAL.pdf

3. Behr, T., Witte, J.J., Hoxtell, W., & Manzer, J. (2009). Towards a global carbon market?Potential and limits of carbon market integration. Global Public Policy Institute. GPPi Policy Paper No.5

Duo Wu's picture

After researching seven major industrialized countries and five emerging economies carbon emissions history of past century, I found that seven major industrialized countries carbon emissions intensity increased first then decreased with the time; five emerging economies' carbon emissions intensity showed a fluctuation, India, Brazil, Mexico have trends of increasing but with low values in carbon emission, China and South Africa have the same trend with those seven industrialized countries, the differences are theirs decreasing sharper and increased again in recent 30 years.
I think the carbon emissions of those countries trend in different ways resulted in two reasons.

Firstly, they had huge gaps in industrialization process. The industrialized countries' processes of economic developments are modernization from industrialization and urbanization. During the increasing of GDP, industrial structure got upgraded, primary industries decreased, secondary industries increased and then decreased, and tertiary industries' proportion increased gradually. In addition, their processes of industrialization followed the way of light-heavy-high combination. On the other hand, the industrialization processes of those emerging economies were remarkably reducing showed a type of compression industrial development model. Meanwhile, they can have successful or failed experiences of developed countries' industrial process, let them got avoid of detouring in their developing and showed a different law of development with developed countries.

Duo Wu's picture

Secondly, huge differences in environment of greenhouse gas emission. Developed countries' industries process started earlier, as they had no problem in restrain of emission allowance. The huge cost of natural resource and energy let them complete their primitive accumulation process, their variation tendency of carbon emission proved natural law of economic development. On the other hand, emerging economies got later in industrial process, they meet the restrict in pressure of carbon emission reduction and retrain of emission space before they have done with their industrialization and urbanization. They have to reduce their unit GDP carbon emissions and intensity. That led to the big difference in variation tendency of carbon emission between developed and developing countries.

Duo Wu's picture

If we also consider the GDP variation tendency, the relationship between GDP per person and carbon intensity in unit GDP, I got conclusions below:

1. Major industrialized countries' and emerging economies' carbon intensity will show different variation tendency.

2. The relationship between the GDP per person and carbon intensity in unit GDP can be divided into four categories: 1) India and Brazil at the stage of low income per capital and low carbon emission every unit GDP. 2) China and South Africa at the stage of low income per capital and high carbon emission every unit GDP. 3) Canada at the stage of high income per capital and high carbon emission every unit GDP. 4) The United States, the United Kingdom, France, Germany, Japan and Mexico at the stage of high income per capital and low carbon emission every unit GDP.

3. Based on the history of seven major industrialized countries' carbon emission, in the ten years which carbon emission reduced most, five countries' carbon emission decreased from 23.3% to 35.8%. Only two countries (UK and France) decreased more than 40%. So, if we considered tendency of Chinese GDP, the possibility of Chinese government aim to reducing carbon emission 40% at least exists only in theory.

Duo Wu  51230750 

Patricia Fleitas's picture

In order to make a conclusion about the topic, I will summarize the key facts that some of my colleagues have developed:


• Coal is the main sources of global electricity production. Between 19990 and 2010 global electricity production increased by 450 Terawatt-h. (Equivalent to add a new Brazil to the planet every year).
• Coal is abundant, cheap to extract, easy to build a power plant and the coal market is not regulated as oil or gas (not controlled as OPEC).
• Around 70,000 MW of new fired coal power plant will be on-line in the next 2 years in China and it is planning to at another 270,000MW in the future.
• China and USA have the highest coal reserves of the world and emits the largest carbon emissions of the entire planet (around 40%).
• Carbon capture pilot projects started to be operated in 2008. Currently around 11 pilot projects are operated, but scale commercial applications are not available and 3% of the worldwide projects (30) have been cancelled.
• Around 50 years are required for a new technology to be mature technically and commercially (According to Dr. Paul Michelle).
• Repeated failures of international commits to cut CO2 emissions (Copenhagen, Cancun and Durban).


As a result, it is likely to think that cutting the C02 emissions are not in the middle term future, but if cutting the emissions is in the presidential agendas of the developed countries, huge efforts of the industry must be done to prove that CO2 carbon capture is feasible at commercial scale.  

References:

  • Paul Mitchell (2012). "Carbon capture technologies". University of Aberdeen. Lectures of energy Technologies. 

  • NewScientist Magazine (2012). "Climate Change". Publication weekly 17 November 2012.

There exists obvious drawback in the carbon emissions trading. Companies are permitted to sell their own emission allowances or keep unused quota till next trading period. The fatal shortcoming is that surplus quota will reduce the trading price for emission allowances and suppress the motivation of investment on new energy technology as well. Companies could think as that since emission allowances are so cheap, it is more cost-effective to generate electricity by contamination fuels. That’s why the consumption of coal increased almost 4%. To be ironic, the reason why emission allowances are that cheap is that German invested billions of dollars on renewable energy which is connected with lower carbon emission of Germany companies and consequently, the demand for emission allowances reduced which result in the price cut. On the contrary, it makes coal more competitive whilst coal is the main cause for climate changing. In another word, carbon emission trading did accelerate the process of climate changing, not hold it back.  Obviously, carbon tax could be introduced to be more effective and feasible method. Another way is to reduce the quota gradually.

Andrew Strachan's picture

Coal fired power plants are being design and built to be more efficient. Given that coal is still very cheap and widely available, the reason for this efficiency drive which cuts carbon emmissions may be due to political pressure and financial incentives such as carbon trading.

Not many companies are altruistic. Shareholders and other types of investor think and act for shortterm gain and the effects of global warming are relatively long term. For this reason, the best method of changing the behaviour of industry is through financial gain, and companies/industry will be attracted to producing new low carbon technology or to seek energy efficiencies. In a global economy the carbon emissions tax must be applied fairly, however carbon trading should thrive.

http://www.nytimes.com/2009/05/11/world/asia/11coal.html

Ernest Appiah's picture

Carbon emission trading scheme is viable in that it is one of the most practical means to tackle the climate change problem. The scheme works in such a way that it rewards efficiency and punishes polluters. The emission trading scheme also comes with the following advantages;·         Increase in the number of green jobs ·         result in lower electricity bills·         improve competitiveness·         anticipating of a climate disasterThe emission trading scheme enables governments to set up lower limits on CO2 emissions with the options that anyone who emit CO2 could either reduce their emissions to meet the targets, or they could buy emission credits from those whose emissions fall under the targets.Referencetheenergycollective.com/.../carbon-tax-more-viable-cap-and-trade

Joan.C.Isichei's picture

Carbon emmission trading is considered to be one of the most
effective ways of confronting the issue of climate change. It has been
estimated that carbon trading will have saved planet earth from 2 billiion
tonnes of CO2 emmissions at the end of 2012[1]. Also, the current world carbon
market is worth an estimated US$140 billiion[1].  However, though carbon trading
gives the aforementioned positive enviromental and economic effects, it also
suffers from certain vulnerabilities with respect to the following external
factors;

·        
Downturn in investment due to the
recent economic crisis.

·        
 Effect of energy disasters;
for example, the Fukushima Nuclear plant disaster increase Japan’s dependence
on fossil fuels for energy.

·        
Policy Change effects such as the United States failing to pass
federal cap-and-trade legislation in 2010.

·        
Carbon price depreciation.

 

Nonetheless, the report, State and Trends of the Carbon Market
2012, shows that carbon market grew by 11% in 2011. This growth took place
regardless of economic turbulence and plummeting carbon prices. Also, the
following countries;  Australia,
New Zealand, South Korea and developing economies like India, Brazil and China
have put in place, plans, for the creation of regional and national markets for
carbon trading. See the table in Figure 1 below.

 

 

 Country
Name 
Start 
Goal 
Key Features 

 Australia
 The Carbon Reduction Scheme(CPRS)
 2011
 Reduce 60% of Australina emissions by 2050
 The first and largest mandatory emissions trading scheme in the
Asia-Pacific.

 New
Zealand
 NZ ETS
 2008
 Reduce emissions compared with 1990 levels
 Covers all GHG from all sectors.

 Korea
 Domestic emissions trading Scheme
 2013
 Reduce emissions by 30% by 2020
 Closely modelled on the EU UTS: petrochemical producers, paper and wood
processors, power generators, steel companies, and electronic chip

 China
 Domestic cap and trade scheme
 2013
 Six provinces and cities starting in 2013
 Contemplating extending to become a national scheme by 2015.

 Brazil
 Brazilian Emission Reductions Market (BERM)
 20??
 Emission reduction target close to 40% of its projected BAU emissions by
2020
 The Brazilian stock exchanges and the Securities Commission will be
operating the market.

 India
 Perform, Achieve and Trade: PAT
 2011
 Reduce electricity’s industrial consumption by 65%
 Rewarding significant energy efficiency efforts in the country’s most
energy intensive industries with tradable energy saving certificates, which can
easily be translated into carbon.

 US/Canada
Patnership
 Western Climate Initiative (WCI)
 2012
 Reduce industrial emissions 15% below 2005 levels by 2020
 Seven US states and four Canadian provinces, respectively responsible for
13% and 50% for their countries’ GHG emissions signed up to participate, though
current US politics means that some have stopped participating.

Figure 1: Emissions trading programmes for various countries (Source [1])

In conclusion,
the future and viability of carbon trading looks very bright indeed.

Source:

Available athttp://www.ieta.org/assets/InTheNews/carbon%20trading%20achievmentskey%20lessons%20and%20future%20forecasts.pdf

 

Liu Yishan's picture

China has planned to establish a national carbon emission trading system by 2015 to achieve both domestic and international energy and carbon intensity reduction goals. However, while amounts of plans and programs have been discussed, there is no domestic carbon trading in China yet by any real measure. The current carbon trading activities in China today remain limited to the Clean Development Mechanism. It is a restriction to the development of China market economy. Thus, China has a strong desire of experimenting domestic carbon trading system. The question is it is hard for China to draw lessons from other existing international carbon trading systems such as the EU ETS, or other regional ones in the Asian Pacific rim, such as in Japan and Australia. China will build its own unique style of carbon market that is innovative and effectively controls rapid carbon emission growth in China. It costs time to establish the market, but China can benefit from it.

Reference: http://www.sei-international.org/mediamanager/documents/Publications/chi...

xingyuan.fu.12@aberdeen.ac.uk's picture

the carbon emission trade is a market for some enterprises which cannot use all the index of carbon dioxide emission. From this point, they can sell the rest part to other enterprises whose index is not enough. Thus, through this approach, the enterprises can be restricted in carbon emission and as a consequence, the environment will be protected.However, in some countries, this mean is not so efficient because some big enterprises just do it for reputation as well as the small company may ignore this provision. Even though some sales platforms have been set up in some countries which are considered as the milestone in this policy, someone still suspects the real trades in these platforms. In my opinion, I think it is better to associate with tax which means if you lead to more carbon emission, you should pay for more tax. In order to decrease the cost of the enterprises, they will try their best to save energy and reduce the carbon emission.   

Richard Sedafor's picture

Liu Yishan, thank you for the information you have posted. It is very interesting to know that China is making plans to establish a national carbon trading system by 2015. I think China should have done so long ago. China is one of the world's largest users of Coal and we all know that using coal to produce electricity and in manufacturing caries with it alot of emissions. Indeed China give off 19.13% of global greenhouse emission[1] and this figure may increase more rapidily. 

Carbon trading ventures should be encouraged in China and more people should take advantage of the opportunity that it brings. Carbon price should be increased and companies who are polluting more should be asked to pay heavier fines( price) than what they are currently paying. I believe the "polluter pays" principle should be applied to industries that are destroying the environment with alot of emissions.

 

 

Reference:

 [1]http://www.abc.net.au/news/specials/climate-change/emissions/ 

Carbon Emission trading is a  different approch to reduce the pollution. It was more a market based approch. In this approch the government or an authority will define limits for the amount of pollutant allowed to emit. It varies with industries.

 

Each industries were allow to emit pollutant upto there limit or cap. the company that need more permit need to buy permit from the company that need only few permit. The transfer of permit is a trade between companies. The company who is buying has to pay for there pollution. And the company which is selling will be rewarded as they reduced the pollution. This trading helped both the economy and reduce the pollution. 

Tilak Suresh Kumar's picture

 

The world's only global system of
carbon trading, designed to give poor countries access to new green
technologies, has "essentially collapsed", jeopardising future flows
of finance to the developing world. Billions of dollars have been raised in the
past seven years through the United Nations system to
set up greenhouse gas-cutting projects, such as wind farms and solar panels, in
poor nations. But the failure of governments to provide firm guarantees to
continue with the system beyond this year has raised serious concerns over
whether it can survive.

A panel convened by the UN
reported that the system, known as the clean development mechanism (CDM),
was in dire need of rescue. The panel warned that allowing the CDM to collapse
would make it harder in future to raise finance to help developing countries
cut carbon. The panel said that governments needed to reassure investors, who
have poured tens of billions into the market, by pledging a continuation of the
system, and propping up the market by toughening their targets on cutting
emissions, and perhaps buying carbon credits themselves.

Governments had a last chance to
restore confidence in the system when they meet at the UN Climate Change Conference
in Qatar to discuss climate change. The envoys participated agreed to toughen their
2020 emissions targets as per the Kyoto Protocol. But still the issue of
funding to help poor countries deal with the fallout from global warming
and convert to clean energy sources complicated the haggling by envoys. Yes, the future of carbon trading will remain a ?.

 

Connie Shellcock's picture


Richard said a few posts back that
China should have established a national carbon trading system years ago
however I would like to highlight one point.  According to Jared Diamonds book Collapse,
16,998 pollution
intensive industries (as of 1995), attributed to 30% of foreign direct
investment in China. This involved developed countries such as the UK and the
USA to pay china to carry out industrial processes that are illegal in their
own countries due to the amount of pollution produced. This means that many
countries if not the whole world are responsible for carbon emissions. We share
the same atmosphere and oceans with each other so it doesn’t make sense to
carbon share.


Azeezat's picture

Carbon Capture and Storage is the use of technology
of capturing carbon dioxide (CO2) before or after the combustion of fossil
fuels (gas or coal), transporting it and pumping it into underground geological
formations. This process prevents large quantities of CO2 from being released
into the atmosphere by securely storing it between impermeable rock and similar
material.

I agree with Connie and Richard’s points about China. The development of carbon emission trading in
China is of great interest to many. Internationally, carbon emission trading
concern stems pri­marily from China’s vital role in determining the success of
any global climate mitigation effort. China today accounts for almost a quarter
of global greenhouse gas emissions and about half of annual emissions growth.

For Carbon Capture to be viable, its technology must
be employed much more widely  but this also is a challenge as there is shortage
of ex­perts who are qualified to design and administer carbon capture for all
pilot regions.

Reference:

http://www.sei-international.org/mediamanager/documents/Publications/chi...

I must agree that most of the points you have all raised are interesting and can be argued either way. However, the question that intrigues me is how sustainable Carbon emissions trading are? At what point will a country have emitted its allotted quota? Of course industrial growth across the continents of this earth is far from equally skewered. The rate growth of the Western world is not comparable to the under developed and developing nations of the world. So do these nations continue to struggle through their economic hardships and sell off their emissions rights to the highest bidder, which I must say would just be a sustained way of remaining in the vicious cycle of poverty and dependence on foreign Aid. Therefore, the way I see it, the trading of rights to emit CO2 although intended as a regulatory move towards a reduction of the effects of fossil fuels on our planet is not a sustainable solution, yes it's a bandage fix but as pointed out we should not only be looking at the output (emissions) and the economic implications it might have in terms of energy saved and jobs created that the cap and trade system may provide. We should instead be looking at what countries on their own part are doing to counteract the effects of carbon emissions. CO2 emissions are not restricted to the country within which it's produced, so if we are trying to cut down on carbon emissions we should also when we talk of sustainable development we should be willing to look into the future as well and not just the present political and economic benefits of present day
resolutions.

Kuma Mede
51126022

 

Carbon emissions trading is a form of emission trading that specifically targets carbon dioxide (calculated in tonnes of carbon dioxide equivalent or tCO2e) and it currently constitutes the bulk of emissions trading.This form of permit trading is a common method countries utilize in order to meet their obligations specified by the Kyoto protocol; namely the reduction of carbon emissions in an attempt to reduce mitigate future climate change. This is a viable means of enforcing global environmental regulations, although countries still default yet it's a  positive step towards implementing environmental safety regulations. Also, this will spur countries to invest in research for new green technologies that are more environmental friendly.

 http://en.wikipedia.org/wiki/Carbon_emission_trading

Uhunoma Osaigbovo

Subsea Engineering D/L

 

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