|
The acid rain trading concept actually worked very well because it only involved direct trading between the emissions generators. It provided incentive for polluters to cut their emissions, because by doing so the direct emitters themselves were able to resell their own credits to other companies that couldn't reduce their pollution. It made pollution reduction directly valuable to the emitter.
The problem with Kyoto is that the credits are awarded at a national level, and not directly to the polluting companies. The U.S. gets X credits, France gets Y credits, and Australia gets Z credits (China, probably the largest GHG producer on the planet, gets to skip this part and pollute to their hearts content). The nations themselves then get to dole out credits from this fixed pool to their own industries, or initiate carbon taxation to bring national emissions levels within their "credit limit". Corporations that cannot lower their emissions to meet national goals can then either petition their governments to buy extra credits for them, or potentially buy credits from the trading market directly (this will be handled differently in every country). The problem with this model is that the companies involved in the emissions reductions do not "own" any credits directly, they are doled out by the government. A true "direct-trade" system might have actually worked, but the Kyoto protocol contains no provision for that. Under the acid rain treaty, Company X could justify spending $5 million on pollution scrubbers because doing so would free up 20 credits worth $50,000 a year each, because they could resell those credits and recoup that expense within 5 years, and make $5 million in profit off the upgrade 5 years after that. There was direct incentive. Under Kyoto, a steel company might reduce their emissions by 20% to free up some credits, at a $10 million dollar expense, only to see their excess allocations stripped from them the following year and handed to a power plant that cannot reduce its output. This not only undermines faith in the market, but keeps the prices artificially low. And if you DON'T think that will happen in the ever-so-politically connected energy markets, you don't read the paper much.
Your theory, basically an idealists view of the market, also ignores how real asset trading works. The value of trades aren't solely based on their current worth, but also projections of future market growth. Kyoto might cause an initial downward trend in GHG emissions, but once those numbers are published the investors will flee the market. That will cause the value of the credits to decrease substantially, undermining their value as a trading tool. Why would a company, or a nation, lower their carbon emissions if it will only gain them a handful of worthless trading credits? For Kyoto to work, those credits need to be worth a LOT, and that can only happen if emissions levels are sustained and the need for a permanent trading market exists. In laymans terms, that means that emissions can NEVER be permitted to return to 1990 levels (and to be sustainable, we really need to get them back to 1950 levels).
My solution is much simpler...Global Carbon Tax. No exceptions, no progressivity. Everyone pays a flat "$X per ton" on their emissions, and that money is routed to an international fund to clean up pollution and fund research into new non-polluting technologies. This still monetizes pollution and encourages companies (and individuals) to conserve, but it cuts out the BS middle men and MORE IMPORTANTLY redirects the fruits of that taxation back into work and technologies that will further promote the very purpose of that tax.
|