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14 May 2009 09:39 am

Cap And Trade, Once More

Matt Steinglass wants both cap and trade and a carbon tax. He makes his case for C&T:

The carbon tax reduces carbon emissions by making it more expensive to burn fossil fuels. But it does nothing about all these other sources of greenhouse-causing emissions. Only cap and trade does.

Cap and trade systems do this by creating tradable carbon credits. Under the Kyoto Protocols’ Clean Development Mechanism (CDM), greenhouse-emissions-reducing projects like forest preservation can submit their projects for stringent review by UNFCCC-licensed assessors. If their projects pass review, they are granted certified carbon credits measured in an equivalent reduction of CO2. Ongoing projects are granted permanent credits, subject to periodic review; projects which reduce a fixed amount of CO2 are granted credits which expire after a period of time. The tradable credits are worth money on the European carbon emissions credit exchange and other trading floors, where they are purchased by coal-fired electric plants and other carbon emitters. There are currently 1431 certified CDM projects, which reduce greenhouse gas emissions by the equivalent of 220 million tons of CO2 per year — about 5% of the total annual emissions of the European Union. These projects owe their existence to the European CEC exchange; a US cap-and-trade system would create many more of them. Thus cap-and-trade encourages reduction of greenhouse emissions in all sorts of ways that wouldn’t happen with only a carbon tax.

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