Posts tagged ‘Environment’

Environment – Capping-and-Trading Carbon Credits

Both the private sector and the U.S. Congress are working from opposite on the same scheme that is supposed to stop and hopefully reverse global warming – the “cap-and-trade” system of “carbon credits.”

This is how the scheme works:

Carbon dioxide (CO2) is known to be the number one polluter of our atmosphere and thus number one culprit in global warming. Private companies, and especially utility companies that produce energy through fossil fuels like coal, are among the top producers of CO2. And right now there is no limit to the amount of CO2 that such companies can produce.

Thus, someone suggested to create an artificial “scarcity” of CO2, which would be a very good thing.

How do you do that? By passing a law to limit the amount of CO2 that each company can produce.

But what if a company produces LESS than it’s allowed amount? Or what if another company needs to produce MORE carbon dioxide for various reasons?

Then the company that is below its “carbon emission quota” can sell that “right to pollute” on the open market to the company that needs to emit more carbon into the atmosphere. Thus, such “carbon permits” can be sold and bought just like regular stocks in the stock market.

The cap-and-trade system is already in use in Europe at this writing (March 2007) and the prices of such permits tripled within the last two years.

An increasing number of giant corporations in the U.S. are now endorsing the cap-and-trade system thinking they need to be at the table when the nature and amount of caps are decided. I think they are being very smart. You either have a role in determining the rules of the cap-and-trade game or you live by its ramifications. You are either sitting at the steering wheel of this cap-and-trade juggernaut or you are going to get hit by it.


Ugur Akinci, Ph.D. is a writer with 20 years of experience. He is available for a wide variety of freelance assignments. Visit his web site for more information on his services.

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Environment – The Politics of “Carbon Credit” Incentives in New Zealand

Using “carbon credits” as a tool and an incentive to slow down global warming by rewarding those that release less carbon dioxide to the atmosphere is a solution that must be implemented with utmost care for the correct policy measures to go along with it.

If implemented within a framework of incorrect politics, it can backfire and either handicap the economy with unnecessary restriction and land use patterns or create serious political fractions within a country, or both.

A case in point is the “deforestation tax” controversy raging in New Zealand (as of early 2007).

It all started when the forest owners in New Zealand felt compelled by market forces to shift their land use from forestry to dairy farming. This would have required cutting down forests to make way for the dairy farms. By 2012, a total of 44,000 hectares of forest are expected to give way to pastures and other uses.

However, there is a problem. When live tress are cut, they eventually release all the carbon dioxide that they have stored inside. Thus deforestation by definition increases the “carbon footprint” and contributes to the greenhouse effect.

The overall cost of “deforestation liability” is estimated to hit $ 650 million by 2012 in New Zealand.

As an incentive to stop or slow down the conversion of forests to pastures, the government announced a deforestation tax for trees that were planted before 1990.

But since the tax would be applied only after a certain future date, the decision actually helped accelerate deforestation instead of slowing it down since everybody wanted to beat the deadline and shift to dairy farming without incurring any taxes.

How much should such permits cost? What should be the size limits on forest plots that would be exempted from such a tax? Which year should be declared as the cut-off date for the taxes?

These are all questions with different sets of “winners” and “losers.” Unless the political balance between such groups are addressed well, not only social justice but even a country’s economic development might be effected adversely while trying to curb greenhouse gases and global warming.


Ugur Akinci, Ph.D. is a writer with 20 years of experience. He is available for a wide variety of freelance assignments. Visit his web site for more information on his services.