Understanding Emissions Trading and Global Warming



It is a mild understatement to say that global warming is both a controversial and misunderstood field. As the decay of the ice packs and slowing of the ocean conveyer become more apparent, the controversy is starting to evolve into an acceptance of global warming as a fact. Given this great acceptance, the question is now what to do about it.

Every society is based upon some form of economy. Although globalization is the much touted economic subject of the day, the industrial revolution is still really the heart of most economies. Economies, particularly first world economies, are based on the production of goods and materials through manufacturing. These same processes contribute heavily to greenhouse gases and the global warming debate. With such an inherent conflict between production and reduction of pollutants, find a solution to greenhouse gases has often been a dubious prospect. The concept of emissions trading, however, may be a solution.

Emission caps are a method for dealing with economies on a nationwide scale. Essentially, countries agree to cap their total output of pollutants and greenhouse gases at a certain level. Each government then converts this total amount into individual caps for industries or business. The caps essentially tell the businesses the amount they are allowed to emit and assign penalties and incentives for coming in below or above said amounts. In practical terms, a business is penalized for polluting or given a benefit for cutting pollutants.

The interesting thing about emissions caps is that they can be traded. Ostensibly, a country or business that falls under the cap amounts can trade their excess emissions allotment for money. In turn, other parties that fail to meet their caps must buy these allotments. By taking this approach, reduction of pollutants become not only a moral choice, but a potential profit center. For example, Brazil has done an amazing job of converting automobiles to ethanol. It has now evolved from an oil importer to an exporter and is selling emission credits on the open market.

Emission trading systems do not represent a new approach to dealing with the pollution problem. On smaller scales, such approaches have been used within the United States as part of the Clean Air Act to force municipalities and states to act. With the implementation of the Kyoto Treaty, this process will become full blown on the international scene. Alas, India, China and the United States are not signatories to the Treaty, which is unfortunate given their economic growth and production of greenhouse gases and pollutants.