Analyzing Carbon Emissions Trading: A Potential Cost Efficient Mechanism to Reduce Carbon Emissions
Donehower, Jonathan, Environmental Law
I. INTRODUCTION II. CLIMATE CHANGE AND THE NEED FOR INTERNATIONAL ACTION III. THE STRUCTURE, FRAMEWORK, AND ADOPTION OF EMISSIONS TRADING A. The Policy Behind the Flexible Mechanisms B. Carbon Emissions Trading 1. Policy Behind Emissions Trading 2. The Structure of the Kyoto Protocol GHG Emissions Trading Scheme 3. Requirements for an Effective Emissions Trading Scheme C. Kyoto Protocol's Project Based Mechanisms IV. THE EMERGENCE OF CARBON EMISSIONS TRADING A. European Union Emissions Trading Scheme B. Effectiveness of the EU ETS 1. Emissions Cap and Flexibility 2. Regulatory Certainty Over Time 3. Transparency and Enforcement 4. Conclusion C. Chicago Climate Exchange D. Effectiveness of CCX 1. Emissions Cap and Flexibility 2. Regulatory Certainty Over Time 3. Transparency and Enforcement 4. Conclusion E. Conclusion V. CONCLUSION
The growing interest in emissions trading systems corresponds to a continued steady rise in greenhouse gas emissions that threatens the world with dramatic climate change. (1) Greenhouse gas (GHG) emissions work as "a blanket around the earth," likely increasing the earth's average temperature (2) over the next one hundred years between 1.1 and 6.4 degrees Celsius. (3) The temperature increase from climate change causes extreme weather patterns such as flooding, drought, and shifting ocean currents. (4) "Eleven of the last twelve years (1995-2006) rank among the 12 warmest years in the instrumental record of global surface temperature (since 1850). (5) The effects of climate change are already visible at the local level. For example, Europe faces dramatic cooling caused by climate change that slows the North Atlantic Drift, the ocean current that gives Europe its warm, mild weather. (6) In the Pacific Northwest, shifts in ocean temperature off the Oregon Coast, most likely caused by climate change, (7) created a hypoxic dead zone (8) for the fifth straight year. (9) Since 2002, when the phenomenon first appeared, the dead zone has quadrupled in size to 1235 square miles, (10) These examples are only two of many and demonstrate the international effect of climate change. Climate change is a global problem and remains unsolvable at an isolated, local level. One ton of carbon emitted in New York has the same climate change effect in Portland, Oregon, as one ton of carbon emitted in China. As a result, the fight to prevent or limit the effects of anthropogenic climate change requires international cooperation. Climate change is a global threat and therefore only international efforts can address local problems such as the hypoxic dead zone and the slowing of the North Atlantic Current.
The United Nations Framework Convention on Climate Change (UNFCCC) (11) creates a possibility for global cooperation in fighting climate change and lays the framework for international efforts to reduce GHG emissions. The UNFCCC's goal is to stabilize "greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system." (12) This task was left to the Kyoto Protocol, which specifically calls for developed countries to reduce their emissions by five percent below 1990 levels during the commitment period 2008 to 2012. (13) The Kyoto Protocol recognizes the potentially high cost associated with reducing GHG emissions and, as a result, allows ratifying countries to use "flexible mechanisms," including emissions trading, (14) joint implementation, (15) clean development mechanism, (16) and joint-fulfillment, (17) in addition to domestic reduction efforts to limit compliance costs. Based on the realization that GHG emission reductions have the same effect regardless of geographic location, the flexible mechanisms allow participants to offset their own emissions by purchasing allowances from other participants. …