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What’s wrong with carbon credits

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Mon, Feb 2, 2009 at 7:08 pm

    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

    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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