The Greenhouse Effects of Cap and Trade, Research Paper Example

Since the Industrial Revolution, which began in the 1800’s, humans have been steadily increasing the Earth’s carbon dioxide levels through industry. Carbon dioxide is a greenhouse gas, meaning that when it is concentrated in the Earth’s atmosphere at sufficient levels, it can cause global temperatures to rise. This has resulted in what is called anthropogenic global warming.  Air pollution and subsequent global warming have been important environmental issues over the past 3 decades, and recently global leaders have met to discuss global warming, greenhouse gases and the future of life on Earth. Knowing that it is essential to cut down global greenhouse gas emissions, leaders have debated the best way to do so quickly, efficiently and effectively. Unfortunately, what they have agreed upon is a scheme known as Cap-and-Trade. Cap-and-Trade is nothing new as it has been implemented in the past several times in several countries in an attempt to reduce local pollution and emissions (Johnson, 2010). The results have been lukewarm at best. Scientists are in agreement that the global level of atmospheric CO2 should be 350PPM. As of December 2010, the global atmospheric CO2 level was at 389.69 PPM, the latest high in an unending succession of highest annual rates in history (CO2 Now, 2010).  Atmospheric CO2 has been steadily increasing despite past Cap-and-Trade scheme. Cap-and-Trade has been repeatedly proven to not be effective or efficient in lowering global atmospheric CO2 levels but has, at the same time, brought huge profits to corporate entities. The minimal lack of success of Cap-and-Trade is due to three major themes that are inherent in the schemes themselves, which are Free Permitting, Offsetting and the fact that it distracts public and policy attention away from real and viable solutions.

The first major obstacle in the ability of Cap-and-Trade to reduce greenhouse gasses is what are known as Free Permits.  Free Permits are given to industrial polluters for no cost. They can, in turn sell these Free Permits to other companies who want to pollute more, the idea being that these Permits will eventually gain value, since each year less and less will be issued. The companies that make a profit from selling their permits will use the profit to make their own company more energy efficient so they wont’ have to end up buying back their own initially Free Permits. This scheme was tried in Europe in order to attempt to meet Kyoto targets.

“The first round of trading was intended to work out kinks in the system and did not have goals for meeting Kyoto targets. Prices for credits started fairly high, but quickly devalued when  it was learned that the European Union handed out too many emissions allowances. The surplus meant industries had little need to make emissions reductions or buy credits to meet their targets. Instead, emissions from large European polluters rose slightly from 2005 to 2006 (Johnson, 2010)”

While on paper the success of the Cap-and-Trade scheme in reducing global CO2 levels seems plausible, the results from the field are indicating a lack of success.

Another set of permits used in the Cap-and-Trade scheme that are a failure are what are known as Offset Permits. “Offset permits are created when a company supposedly removes or reduces carbon. They get a permit which can be sold to a polluter who wants permission to emit more carbon. In theory, one activity offsets the other (Leonard, 2010).” There are several issues with Offset Permits, including the ability to adequately judged how much carbon has been offset and its value in reducing overall atmospheric CO2 levels. An example of how Offset Permits can be used includes enabling developing countries who cannot afford to develop cleaner energy techniques but cannot afford a stop in production can buy Offset Permits from richer countries that are able to reduce their emissions through development of cleaner energy.

“Michael Wara, a research fellow at Stanford University’s Program on Energy and Sustainable development, says that even though developing nations such as China and India are benefiting, the mechanism has not achieved its goals. [He says] ‘Offset Permits can play a role in engaging developing countries, but only as one small element in a portfolio of strategies’ (Johnson 2010).”

Cap-and-Trade has had another negative impact on reducing greenhouse gasses, and that is by luring the public into a false sense of security that Cap-and-Trade has solved the problem of global greenhouse gas emission. The 1,400 page American Clean Energy and Security Act of 2009 and its cap-and-trade scheme was sold to the American public as a solution to reducing the amount of greenhouse gases the U.S. collectively emits into the Earths atmosphere.  However, this piece of legislation is simply business as usual and its usefulness in reducing CO2 emissions in a meaningful amount is questionable, especially as the bill, as stands, “guts the Clean Air Act, removing the EPA’s ability to regulate CO2 emissions from power plants (Hansen, 2009).”

One of the most insidious aspects of Cap-and-Trade is the way in which it can be manipulated by unscrupulous individuals for profit. Oversight and regulations on Cap-and-Trade exist but are difficult, and sometimes impossible, to enforce. An example comes from the Sinar Mas corporation of Indonesia. The company cut down virgin, “indigenous forest, causing major ecological and cultural destruction. Then, they took the wasteland they created and planted palm oil trees (Leonard, 2010).” Scams such as this are done in order to profit from loopholes in cap-and-trade schemes, driving corporations to actually degrade the Earth and increase carbon emissions in order to benefit from financial incentives inherent in the scheme. While the results of cap-and-trade schemes implemented in the past have not brought the results they claimed to on paper, the financial benefits to corporate entities have been substantial.

There were high expectations that 2009 would show a drastic decrease in CO2 emissions due to the cap-and-trade schemes that had been implemented. The results were less than stellar. “The global decrease was less than half that had been expected (Saigon-GPDaily, 2010).” While emissions of greenhouse gasses from the burning of fossil fuels decreased in countries such as Japan, the U.S., Britain, Germany and Russia, emissions increased dramatically in developing nations such as China and India. By December of 2010, the worlds atmospheric CO2 concentration had hit an all time record high. Despite the small decrease in greenhouse gas emissions, the U.S. is still the number two polluter, counting for 17% of global CO2 emissions annually. Even with cap-and-trade incentives, industry is still hesitant to make the switch from fossil fuels to clean energy, probably because the U.S. government “subsidizes fossil fuels at more than twice the rate of renewables (Leonard, 2010).” The result is that the worlds atmospheric CO2 levels are continuing to rise unabated and as of yet, a workable solution has not been advanced as leaders continue to cling to failing cap-and-trade schemes.

There are different models that have been proposed by scientist to predict the effects of global warming from greenhouse gasses.  An increase in global temperatures could bring benefits to high latitude countries by bringing warmer weather leading to better agricultural production. However, lower latitude countries have a high potential for being devastated by heat waves and droughts. Island nations that sit just above sea level face the hazard of being sunk as global oceans rise due to melting ice caps. It is obvious that something needs to be done to reduce greenhouse gas emissions to reverse the trend of global warming. However, cap-and-trade schemes are not the answer as they “suffer from inherent problems of enforceability and verifiability that both cause significant inefficiencies and create inevitable tradeoffs between equity and efficiency (Johnston, 2009).”

Cap-and-trade is currently the focus of U.S. policy to reduce greenhouse gas emissions. Instead of relying on the market value of permits and credits to entice industry polluters to willingly stop emitting dangerous levels of greenhouse gasses into Earth’s atmosphere, policy should instead enforce new stringent standards, punishing industry polluters instead of rewarding them. Cap-and-trade schemes such as Free Permits and Offset Permits have not been shown to be effective in any meaningful reduction of greenhouse gasses, as indicated by the steady increase of global atmospheric CO2 levels.  As greenhouse gasses continue to pour unabated into the Earth’s atmosphere by fossil fuel polluters, the future of life as we know it rests in cap-and-trade being successful, a thought which makes many quite uneasy.

References

Earth’s CO2 Home Page. (January, 2011) CO2 Now Online. Retrieved from http://co2now.org/

Hansen, J. (2009). G-8 Failure Reflects US Failure on Climate. Common Dreams Online. Retrieved from http://www.commondreams.org/view/2009/07/10-8

Johnson, T. (February, 2010). The Debate over Greenhouse Gas Cap-http://www.cfr.org/climate-change/debate-over-greenhouse-and-Trade. Council on Foreign Relations Online. Retrieved from gas-cap—trade/p14231

Johnston, J.S. (July, 2009) Problems of Equity and Efficiency in the Design of International Greenhouse Gas Cap-and-Trade Schemes. Harvard Environmental Law Review. 33(2), 405-430.

Leonard, A. (2010) The Story of Cap and Trade: Why You Can’t Solve a Problem with the Thinking that Created it.  The Story of Stuff Online. Retrieved from http://storyofstuff.org/pdfs/capandtrade/capandtrade_footnoted_script.pdf

No Letup in Carbon Emissions, Scientists Warn. (November, 2010) Saigon Giai Phong English Edition Online. Retrieved from http://www.saigon-gpdaily.com.vn/International/2010/11/87365/