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Carbon Cap

   

Carbon Cap

There are several tools available, for reducing the amount of carbon dioxide and other greenhouse gases, that get dumped into our sky each day. Some of the most talked about include:

Taxes: Carbon Tax

Coal fired electrical generating stations

A carbon tax is a method to charge people and industry for "dumping" carbon into the atmosphere. A carbon tax attempts to equalize the true cost of all goods. For example, under a carbon tax, electricity produced by wind farms would be cheaper than electricity produced by coal fired generating plants. Thus with a free market, coal fired plants would disappear (through time) and more wind farms would be built.

The biggest problem with a carbon tax is that it must be VERY high before it has an impact on people's decisions. Even with reduced emissions per person, with a growing population, overall worldwide carbon emission can still grow rather than reduce! Carbon taxes also impact the poor, more than the wealthy.

Regulations: It's the Law

Regulations are rules/laws passed by the government, to require people and business to do certain things. Regulations tend to be very specific and vary from sector to sector. Examples include industry wide rules that set the minimum mileage (mpg or km/100l.) for automobiles or rules that require electrical utilities to purchase a minimum percentage of power from renewable resources.

Regulations are good at forcing industries to "do the right thing" when they otherwise would not do it on their own. However, you require a never ending list of regulations to cover all the industries and businesses that are producing carbon dioxide and greenhouse gases. As well, the industries tend to resist the regulations rather than looking for their own solutions and opportunities. Enforcing the law, over a large number of companies and industries can be quite onerous and expensive.

Investments

Government investments have made huge changes in the past. Public funds have been used to build schools, roads, dams, national infrastructure and the internet. It can also be used to put in place, a post-carbon infrastructure. Investments are made through grants, tax breaks and outright spending on major projects. Investments support desirable projects that the market, by itself, could not fund.

The challenge has always been to ensure the correct projects are funded. Investments can support great projects such as solar panels on every roof. However, they can't guarantee, on their own, that overall carbon emissions are reduced to the required level.

Carbon Cap: Cap & Trade, Cap & Dividend, Auction, Giveaway

A Carbon Cap attempts to set a hard limit on the amount of carbon emissions produced today and reduce this CAP every year until the desired carbon emission level is achieved. A Carbon Cap is the only alternative that can guarantee future emission levels.

Of course, a carbon cap needs to be implemented in such a way, that it achieves the desired results. We have examples where a CAP worked well (Sulphur Cap) and we have examples where a CAP did not work well - European Cap & Trade with Giveaway of Credits.

The Solution

CO2

In reality, a mixture of all tools will bring about the desired carbon reductions the quickest and with the highest probability of success.

Carbon Cap Systems

The common thread in all Carbon Cap systems, is the "CAP". Carbon emissions are capped at the present level. The industries that produce carbon, are required to "own" enough credits to cover all of the carbon they produce in a year. Each year the number of carbon "credits" is reduced and thus the amount of carbon produced is also reduced.

Who Needs Carbon Credits?

Do you require carbon credits to be obtained by the "last user" of the carbon, the consumer? Or the first person to create the carbon - Upstream Source, such as the oil company or coal mine. Are does everyone need carbon credits if they touch carbon?

The easiest system is to control the "source", the upstream market. Any company that brings carbon into the market, would require a carbon credit for the amount of carbon touched. This reduces the number of interfaces involved and touches ALL CARBON. The system is much easier to control and monitor/enforce.

Obtaining Carbon Credits

Carbon Credit Giveaway

In a Giveaway system, the carbon credits are initially given to the companies that have historically produced carbon. Initially, each company would receive the same amount of credits, as carbon that they are producing at the moment. Each year the government would buy back some of the credits, thus reducing the overall carbon emissions. If company "A" continues to produce carbon dioxide at the same level each year, they would need to purchase (cap and TRADE) additional carbon credits form company "B" which reduced it's carbon output by more than the required level that year.

One big issue with giving away carbon credits is deciding how many to give to each company initially. With Europe's first attempt at a Carbon Cap and Trade system, far to many carbon credits were handed out, free of charge. Thus, the companies involved did not need to reduce their emissions and the credits became worthless. Already in the USA, we see large electrical producers applying for permits to add another 150 coal fired generating stations. If they can lobby the government to "giveaway" the credits, they could make a fortune from these new coal fired plants, without helping the planet. They would simply close the new coal plants, sell the "free" credits, and party on their free money from the government.

Carbon Credit Auction

With a Auction system, each company must purchase the carbon credits they need. It's still important to ensure that the total number of credits auctioned, does not exceed the present carbon producing level. However, if companies must pay for their credits, this should be easier to monitor and enforce.

 

Who gets the Money: Cap and Trade, Cap and Dividend

Everyone agrees that carbon related products will increase in price, as the cost of dumping carbon dioxide into the air, is included within the product. The money from auctioning off carbon credits can either go to the government or to the people.

Government: if the government were to keep the funds raised through the auctioning of carbon credits, hopefully they would spend these funds on investments/projects, to reduce future carbon dioxide and greenhouse gas production.

People: Peter Barnes has suggested that funds from carbon credit auctions should be paid back equally, to all people. He calls this system, Cap and Dividend.

Cap and Dividend

Under a Carbon Cap and Dividend system, all of the money raised through the annual auction of carbon credits, is returned to "the people". Each person would receive exactly the same amount of money from the proceeds of the auction of the credits. These funds would help to offset the increasing cost of carbon based goods.

Under Peter Barnes' Cap and Dividend system, if an individual were to conserve more, reducing the carbon output, they could end up financially ahead of the game, through their carbon dividends.

This system tends to protect family incomes as the price of goods increases because of reducing carbon emissions. Cap and Dividend also has a smaller impact on the poor, as they typically consume/produce less carbon. If dividends are issued monthly to all people, this option is more likely to be accepted by "the people" and therefore more likely to be implemented the the politicians.

Cap and Trade No No's

  1. Safety Valve: under a safety valve system, should the price of carbon credits increase to a set (high) level, the government issues additional carbon credits to bring the price back down. This defeats the concept of CAP and thus the whole purpose of CAP and Trade.
  2. Carbon Offsets: are "new" projects that claim to "remove" carbon dioxide from the atmosphere. As an example, oil company "A" could fail to reduce their carbon emissions, but rather than purchasing the carbon credits to cover their emissions, they may plant 100 acres of trees and claim that no additional carbon dioxide was added to the atmosphere. The trees OFFSET their additional carbon dioxide production. Once again, this process removes the CAP - removes the guaranteed reduction in carbon dioxide emissions. It voids the whole CAP process. What happens if 30 years down the road, the trees catch on fire releasing all that carbon into the air once more?

Carbon Border Fees

We can't wait for everyone on earth to simultaneously agree to the exact same carbon reducing scheme. We must do our part now. The price of goods will increase as the cost of spewing carbon dioxide into the atmosphere is included in the overall production of those goods. If another nation is undercutting the price of locally produced goods due to the fact that they do not include a cost for reducing carbon emissions, then a border tariff on those goods, to reflect the cost of carbon emissions, should be implemented. Yes, this is a difficult subject to approach and implement. Carbon Cap and Trade agreements will remove this requirement for some countries. If Europe and North America can agree to a similar Carbon Cap and Trade agreement, then there would be not need for Carbon Tariffs for products produced and traded between these countries. The desire to trade, will entice additional countries to accept a similar Cap and Trade program.

CO2 Emissions by Country

CO2 Produced by Country

 

Where Do We Go From Here

A combination of tools: Carbon Cap and Trade, Regulations and Investments, will increase the likelihood of success. A Cap and Trade system, with auctioned carbon credits must be included in the solution.

Several countries, states and provinces have already implemented their own alternatives. Our window of opportunity is not infinite. However, we need to get it right the first time. We can not implement a faulty system and realize in 2020 that it did not work.... that will be too late.

Take action now. Contact your politicians. Let them know you want action now.

 

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