Policy Innovations The central address for a fairer globalization

A publication of the Carnegie Council

The Emissions Game

How markets can help save the planet

January 2007

By Simon Powell (Head of Power Research, CLSA), Christine Loh (Civic Exchange), and Roger Raufer (International Environmental Trading Group)

This CLSA Blue Book report gives a detailed account of emissions trading schemes and their potential for environmental mitigation and profit generation. The authors cover the U.S. Acid Rain Program, the Kyoto Protocol and its Clean Development Mechanism, the European Union Emissions Trading Scheme, climate exchanges, China's pilot programs, and the possibility of linking up these disparate systems.

FROM THE EXECUTIVE SUMMARY

Emissions trading will become more widespread as countries come to grips with dealing with the challenge of environmental deterioration as a result of rising levels of greenhouse gases. GHG emissions differ from other air pollutants because they have a global impact—regardless of where they are generated; this results in global warming, leading to climate changes. Other pollutants tend to have more localised or regional influence. It is becoming obvious that climate is a global public good, and dealing with it will require determined local, regional, as well as global efforts.

To control GHG emissions worldwide, it will be necessary to put a "price" on carbon—explicitly through a carbon tax or emissions trading—so that people can see the full cost of their actions. This would then lead individuals and businesses to switch away from high-carbon goods and services to low-carbon alternatives. Economic efficiency points to the advantages of a common global carbon price—emissions reductions would then occur wherever they are the cheapest.

External Link: The Emissions Game: How markets can help save the planet