EcoWatch -
The principle that polluters should pay for the waste they create has
led many experts to urge governments to put a price on carbon
emissions. One method is the sometimes controversial cap-and-trade.
Quebec, California and the European Union have already adopted
cap-and-trade and Ontario will join Quebec and California's system in January 2017. But is it a good way to address climate change?
The program sets an overall limit—a cap—on the amount of greenhouse
gas emissions a province can emit. It then tells polluters, such as
heavy industry and electricity generators, how many tons of carbon each
can release. For every ton, polluters need a permit or "allowance." So,
if a company's annual limit is 25,000 tons, it would require 25,000
allowances. If a company exceeds its limit, it can purchase additional
allowances from another firm that, because of its greater efficiency,
has more allowances than it needs. This is the "trade" part of the
equation.
Although an individual company can exceed its greenhouse gas limit by
purchasing credits, the province as a whole can't. The overall limit is
reduced every year, so if the law is followed, cap-and-trade guarantees
annual emissions reductions. The declining cap is the system's great
strength and the way it protects the environment.
How effective is it? Although the answer isn't straightforward,
there's evidence cap-and-trade played a key role in reducing acid rain
in the U.S. The 1990 Clean Air Act allowed power plants to buy and sell
the right to emit sulphur dioxide. Since then, U.S. sulphur dioxide
concentrations have gone down by more than 75 percent. As Nobel Prize-winning economist Paul Krugman wrote in the New York Times, "Acid rain did not disappear as a problem, but it was significantly mitigated."
Despite this and other successes, some experts are skeptical, arguing
that cap-and-trade amounts to little more than a cash grab by
government, a tax in everything but name. Others say it's a mistake to
expect climate change can be addressed through markets, when the problem
actually requires changing our entire approach to economics, with a
commitment to a steady-state economy and an end to the commodification of nature.
Some experts have also noted that the emissions reductions it brings are often modest. A 2015 paper in Canadian Public Policy
claimed Quebec's system "is still too weak to meaningfully address the
environmental imperatives as outlined in the Intergovernmental Panel on
Climate Change's 2014 Fifth Assessment Synthesis Report, in which fully
eliminating carbon emissions is the benchmark for long-term policy
goals." From 2013 to 2014, California's allowance cap went from 162.8 to 159.7 megatons, a drop of less than two percent.
Ontario's proposed legislation indicates its program will have some
great strengths and a number of shortcomings. It will likely have wide
coverage, applying limits on most of the province's emissions, including
those from transportation fuels. (California's system did not initially include these fuels).
Ontario is expected to reduce emissions by more than four percent a
year—about twice the initial rate of California—and generate $1.9
billion annually from the plan. That money will be invested in "green"
projects throughout the province with the goal of reducing carbon
emissions even further.
Ontario's proposal to give away many allowances to big emitters is
less encouraging. The government says it will eventually phase out this
free disbursement, but in the meantime millions of dollars in government
revenue that could be used to support renewable energy and public transit will be lost.
To keep the bulk of fossil fuels in the ground—as scientific evidence says we must—we
need a variety of strategies. Cap-and-trade helps reduce emissions and
generates billions of dollars for other strategies to address climate
change. It also embodies the polluter pays principle. But it's not
enough on its own.
The David Suzuki Foundation and others have long argued
that provinces and the federal government should put a price on carbon,
through carbon taxes, cap-and-trade or a combination of both. The
urgent need to address global warming means provinces that have adopted
cap-and-trade need to strengthen it by ensuring emissions drop faster
and polluters pay a price that truly reflects the damage caused by
carbon pollution.
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