Catching Up with the New Carbon Cycle: While Australia Has Been Slow to Embrace Carbon Emissions Trading, the European Union and to a Lesser Extent the US Have Been Busy Exploring the Potential of Carbon Markets, Positioning Themselves for a New Global Paradigm

By Taylor, Robin | Ecos, August-September 2007 | Go to article overview

Catching Up with the New Carbon Cycle: While Australia Has Been Slow to Embrace Carbon Emissions Trading, the European Union and to a Lesser Extent the US Have Been Busy Exploring the Potential of Carbon Markets, Positioning Themselves for a New Global Paradigm


Taylor, Robin, Ecos


[ILLUSTRATION OMITTED]

According to the World Bank, in 2006 the global market for carbon emissions trading was worth around US$30 billion--an almost threefold increase from 2005. (1)

Carbon markets function by placing a cost on carbon emissions, a value on emissions reductions, and enabling trade of the resulting allowances or credits.

Through this market-based approach to the problem of reducing greenhouse gas emissions, participants buy and sell permits for emissions or credits for emissions reductions (see box) through regulated or voluntary markets.

The proponents of emissions trading say it is the most cost-effective way of stabilising or reducing high levels of atmospheric greenhouse gases while also promoting reforestation.

Its critics, however, claim that, unless they send a strong price signal to polluters, such schemes are simply delaying the inevitable--dealing with the issue of burning fossil fuels.

The cap and trade model

The most widely accepted trading model is 'cap and trade', on which the world's largest market--the US$24.3 billion European Union Emissions Trading Scheme (EU ETS)--is based.

Under this model, a limit or cap on the number of carbon allowances allocated creates the scarcity needed for a trading market to emerge.

The EU ETS is based on a common trading 'currency' of emission allowances. One allowance (carbon credit) represents the right to emit one tonne of C[O.sub.2].

Companies that keep emissions below their allowance limit can sell their excess allowances at a price determined by supply and demand.

Those finding it hard to stay within their limits can either reduce their emissions--for example, by investing in more efficient technology or by using a less carbon-intensive energy source--or they can buy the extra allowances they need at the market rate. They can also choose a combination of the two.

Cap and trade proponents argue that this flexibility ensures emissions can be reduced in the most cost-effective way.

Companies that pollute beyond their allocated amount must purchase carbon credits, which represent emission reductions from elsewhere in the economy. These credits can either come from companies emitting less than their maximum allowance, or from a provider that is producing 'offset' credits.

Offset credits may be generated in a number of ways, such as planting trees (which absorb greenhouse gases), or flaring methane from underground mines or landfill sites (i.e. burning it to prevent it from entering the atmosphere--flaring methane results in 7.5 times less global warming potential than uncontrolled release of the gas).

Offsets are measured in tonnes of C[O.sub.2] equivalent of emission reductions compared to an established baseline.

Companies such as CO2 Australia and Easy Being Green have been active in the local offset sector, generating credits from forest sinks and energy efficiency projects, respectively.

Regulated trading schemes

The European Union's ETS has been operating since 2005 and covers about 11 500 installations in 25 member countries, accounting for about 45 per cent of the EU's total C[O.sub.2] emissions.

The EU ETS takes as its starting point the Kyoto target for reducing combined emissions of greenhouse gases by eight per cent from 1990 levels by 2008-2012. For each member state, this target has been translated into different emission reduction or limitation targets.

The cost of achieving these targets is estimated at between 2.9 billion and 3.7 billion euros annually,

Because the scheme requires mandatory monitoring and reporting of carbon emissions, participating companies are required to establish C[O.sub.2] budgets and carbon management systems. Emitters can use this information to selectively reduce emissions--for example, by improving production processes or investing in new technologies. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Catching Up with the New Carbon Cycle: While Australia Has Been Slow to Embrace Carbon Emissions Trading, the European Union and to a Lesser Extent the US Have Been Busy Exploring the Potential of Carbon Markets, Positioning Themselves for a New Global Paradigm
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.