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Emissions Trading |
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Can the market help cut CO2? |
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By Adam Smith |
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Posted Monday, May 10, 2004 17:05 GMT
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ASHLEY COOPER/CORBIS
| TRADE YOU:
E.U. firms will soon be swap pollution credits. |
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European firms have long enjoyed peddling their wares freely around the E.U.'s single market. Starting next year, there will be a new commodity for sale: greenhouse gas emissions. Although it's the first large-scale system of its kind, the principle is simple: a company or plant is assigned a carbon dioxide emission limit, typically based on its historical emissions average. If a firm lowers its emissions below the allocated limit — by using renewable energy, switching from one fuel to another, or through geological carbon sequestration — it can sell its remaining allowance to another company that's set to breach its quota. The Brussels scheme envisions 12,000 industrial sites trading emissions allowances, helping slash 1990 emission levels by 8% before 2012.
Cuts to the E.U.'s greenhouse gas levels are overdue. Levels in the original 15 countries are expected to overshoot the mark by 7.5% in 2010. Still, no one seems to be feeling the heat just yet. Fourteen of the E.U.'s 25 members have yet to submit final plans for the trading scheme, despite this year's May 1 deadline. "The news is bad," says Rob Bradley, energy specialist at the environmental group Climate Action Network Europe. Some governments, he says, have "handed out allocations like it's Christmas." But many experts remain optimistic. "It's important to have challenging targets, yet still promote flexibility and start off gradually," says Stephen Bygrave, analyst at the OECD. When the trading system does get going next year, the E.U. may well have found a novel way to make environmental care profitable.
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