Friday, January 14, 2022
#14 / Carbon Trading
After the Glasgow climate change meeting ended, The Wall Street Journal ran a front page article that proclaimed, "COP26 Opens Path to International Carbon Trading." That headline makes it sound like this is a real step ahead, and that carbon trading is a very good thing.
Actually, it's not a good thing - not if you accept the premise that reducing greenhouse gas emissions should be priority number one for everyone. "Carbon Trading" is a way to make money more important than emissions reductions. California, regrettably, has pioneered the field.
Here is how carbon trading works: First, a governmental body documents current emissions from everyone. Next, the government sets an emissions reduction requirement for everyone. Next, industries that don't want to meet their required emissions reduction target can buy emission "credits" that allow them to continue to emit greenhouse gasses beyond the mandated reductions. Of course, the industries have to pay for the credits. They pay a designated governmental authority, which operates an "exchange," and the governmental exchange invests the money collected from those who choose to pay for credits by investing it with those who are willing and able actually to reduce emissions.
Emitters willing and able to reduce emissions beyond the amount they would otherwise be required to achieve are paid off, through the governmental exchange, by those industries that decide that they would rather purchase credits than actually reduce emissions themselves. The idea is that this system allows required emission reductions to be achieved in the most economically efficient way possible. An oil refinery, for instance, might have to pay a lot of money to meet an emissions reduction mandate. Why not let a hog farm reduce its emissions, instead, because the hog farm can reduce emissions more cheaply than the refinery? In other words, why bother to regulate the industries that are emitting the greenhouse gases that are putting human civilization at risk when "the market" can achieve the same result?
Here's the problem (just in case you haven't figured it out for yourself). We are in a global climate crisis. It is imperative that we reduce emissions to the maximum amount technically possible at the earliest possible time. If it is technically possible for the hog farm to reduce emissions, the hog farm should be compelled to make as many emission reductions as it can. If it is technically possible for the oil refinery to reduce emissions, the oil refinery should be compelled to do that - again, to the maximum amount that it can. "Trading" away your emission reduction responsibilities does not achieve the goal of making the maximum emissions reductions possible at the earliest possible time.
That Wall Street Journal headline - "COP26 Opens Path to International Carbon Trading" - probably does sound good to many readers of The Wall Street Journal, those who measure value in terms of money. For those who place a higher priority on protecting the planet from the climate change catastrophe that our human activities is causing, this outcome of the Glasgow summit is not good news at all.