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What’s wrong with carbon credits

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Mon, Feb 2, 2009 at 7:08 pm

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What’s wrong with carbon credits

Here’s an environmental blog that gets straight to the heart of what’s wrong with existing and planned "cap and trade" schemes to reduce global warming emissions with a free market in so-called "carbon credits." The biggest problem is that governments give away too many free credits, allowing heavy poilluters to buy the credits from other companies at a lower cost than going green.

The European Union’s Emissions Trading Scheme (ETS), created in
2005, is the market example the rest of the world is watching to
possibly evolve into a global program. Allowance permits are given to
all companies; heavy polluters can then purchase the permits being sold
by companies that have reached emissions goals.

However, the program
has recently been criticized because too many companies are selling
their permits to raise money, thus flooding the market and driving down
prices. Lower prices benefit high polluters (e.g., oil companies) who
can then forgo greener policies by purchasing cheap permits.

Part of the problem is the slowing economy that is causing less
industrial activity and, in effect, less carbon is being produced.
Permits were also initially handed out for free, so companies are
selling them for pure profit. Officials worry that the simple solution
— removing some of the excess permits — could cause the entire system
to collapse because businesses will no longer have confidence in the
market.

To say nothing of the fact that under this kind of carbon trading, corporations selling the credits get all the profit, while consumers pay all the costs of carbon reduction.

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