| Climate change is an environmental issue that has | | | | In some countries, cap-and-trade systems |
| become a global concern affecting all nations. To | | | | patterned after the Kyoto Protocol are being |
| this end, countries worldwide are taking | | | | employed alongside policies that aim to reduce |
| collaborative measures to mitigate the problem. | | | | greenhouse gas emissions. For example, the |
| For example, the Kyoto Protocol, which has been | | | | United States has several carbon measures in |
| ratified by more than 100 countries (read: a | | | | place, such as the Regional Greenhouse Gas |
| dramatically lower number are formally bound) | | | | Initiative (RGGI), the Western Climate Initiative |
| includes many regulations and initiatives whose | | | | (WCI), the Chicago Climate Exchange (CCX), and |
| objectives are to help reduce greenhouse gas | | | | an initiative provided for by the Global Warming |
| emissions. One popular initiative that the Kyoto | | | | Solutions Act of 2006 in California. |
| supports is carbon credits, also known as carbon | | | | Proponent Viewpoint |
| offsets (which is actually a form of regulatory tax | | | | Proponents point out that the world at large has |
| since someone has to pay a carbon tax to | | | | to start somewhere to arrive at a system that |
| provide the credit part of the carbon credit | | | | begins to reduce greenhouse emissions. They |
| system.) | | | | argue that carbon credits offer the best |
| Carbon credits are measured per metric ton of | | | | intermediary solution until that time comes when a |
| carbon dioxide emissions or its equivalent in other | | | | more definitive and viable system is put in place. |
| greenhouse gases. Typically, a government or an | | | | They also praise the carbon credit process |
| international body establishes a system that sets | | | | because it is governed by a global marketplace, |
| a limit, known as a cap, on the total amount of | | | | as opposed to other more bureaucratic and |
| emissions from all participating countries. | | | | self-serving schemes. Advocates say reducing |
| Participants are given equal allowances, or credits, | | | | greenhouse gas emissions and mitigating climate |
| based on the cap system. (There is a problem | | | | change should be a collective effort. Governments |
| determining carbon caps because there is minimal | | | | have responded by making carbon credit trading a |
| agreement and integration among groups and | | | | more lucrative way of enticing industries to do |
| regulatory bodies about implementation time | | | | their share in solving a global problem. |
| frames and use of tax proceeds that creating | | | | Opponent Viewpoint |
| carbon credits. This issue goes beyond the scope | | | | Parties opposed to the carbon credit system |
| of this article.) | | | | argue that it is a counterproductive measure that |
| Participants (generally read Companies) are then | | | | unfairly penalizes consumers and businesses |
| organized into groups. If participants need to | | | | compared to using tax incentives or tax credits. |
| exceed the cap, they have to buy carbon credits | | | | Opponents also argue that a cap-and-trade |
| from other groups who have unused credits, at a | | | | system is another way for politicians and their |
| value set by the market. Simply put, carbon | | | | governments to get more money for causes |
| emissions are treated as commodities that can be | | | | their lobbyists prefer and not necessarily do what |
| traded between participants, while the total | | | | is best for the country as a whole. They argue |
| number of credits being traded in the market | | | | that alternative energy sources should be |
| must not exceed the total cap. | | | | subsidized until technology and scale of application |
| Reward-Penalty System | | | | results in lower prices that makes renewable |
| The overall objective of carbon credits trading is | | | | energy affordable. They believe that |
| to encourage companies to reduce their | | | | governments are exploiting the situation and plan |
| greenhouse gas emissions. Those that do not | | | | to raise taxes for non energy purposes. |
| exceed their cap may sell their unused credits in | | | | Most countries agree that there are |
| the market or directly to other companies that | | | | environmental and health benefits to be gained in |
| have to exceed their cap. This implies that those | | | | moving toward a greener business environment. |
| that do not exceed their cap are rewarded by | | | | Given this position, the conversion to some |
| being able to sell their credits; while those that are | | | | renewable energy policy is probably inevitable. The |
| not able to control their emissions are penalized | | | | overwhelming concern, however, has to do with |
| and have to pay the price. | | | | how these policies will be executed. The timing |
| The Kyoto Protocol has created a system of | | | | and total costs (direct and indirect) of the |
| trading caps among its signatory countries (a total | | | | changes are not clear. At the root of this concern |
| of 181 countries, which include Russia, France, | | | | is the uncertainty about which groups will benefit |
| Germany, Canada, Norway, United Kingdom, India, | | | | and which groups will suffer. But one thing is |
| to name just a few). Basically, the cap requires | | | | certain: With congressional leadership favoring the |
| countries to reduce their emissions 5.2% below | | | | acceleration of greener energy in a way that |
| their 1990 baseline over the 2008 to 2012 period. | | | | benefits their constituents and lobbyists, there will |
| The total amount of carbon credits to be | | | | definitely be winners and losers. |
| allocated among countries is determined by the | | | | What the carbon credit discussion points to is the |
| Clean Development Mechanism (CDM) and Joint | | | | urgency for business to begin planning NOW for |
| Implementation (JI) projects, which allow for the | | | | the inevitability of a greener world. Those |
| creation of credits through emission-reduction | | | | businesses that prepare for it will prosper; those |
| projects. | | | | that do not will suffer the consequences. |