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.
