January 10th, 2018
Effectiveness of Emissions Trading in Reducing Global Warming – counterarguments
Despite the benefits provided by emissions trading, some of its features may still lead to its lack of effect in bringing significant reduction in emissions. First of these is that emissions trading may actually be a rearrangement of pollution thus not having an overall effect of lowering global warming (Jaffe & Stavins 2007). Since organizations with higher emissions level can purchase permits to meet their level of emissions, emissions trading could prove a deterrent to pollution reduction where organizations find the marginal costs of reducing emissions being higher than the purchase price of additional permits (Stavins 2001; Jaffe & Stavins 2007). Such a system could prove controversial and unethical when viewed as a trade of pollution with country differences in level of industrialization placing the underdeveloped countries at a disadvantage (Jaffe & Stavins 2007). Aspects such as political barriers and high start-up costs for establishing a comprehensive emissions trading system may further curtail the degree to which emissions trading becomes adopted by various countries thus adversely impact on its effectiveness in reducing global warming (Jaffe & Stavins 2007; Ellerman & Joskow 2008).
Emissions trading offers a potential for encouraging investment in pollution reducing innovations. This paper purposed to evaluate whether emissions trading is a prudent approach for reducing global warming. Despite its possible effect of rearranging the levels of emissions among various organizations and countries, the approach provides incentives for firms to pursue emissions reducing strategy. A main incentive for this is the quantification of pollution by placing a price on the permits thus making emission part of the internal costs of doing business. By such a way organizations would be motivated to develop solutions that lead to cost efficiency in terms of emissions and possibly earn additional profits by selling their surpluses. In the long-term most firms would move towards cost efficiency and by lowering the overall allowable limits a significant reduction in global warming could be achieved in the long run.
Ellerman, AD & Joskow, PL 2008, The European Union’s emissions trading system in perspective. Pew Center on Global Climate Change. Available from: <http://www.pewclimate.org/docUploads/EU-ETS-In-Perspective-Report.pdf>. [25 November 2010].
Garner, R 2006, “Regulating a national emissions trading system within Australia: Constitutional Limitations”, MqJICEL, vol. 3, pp. 83-112. Available from: <http://www.law.mq.edu.au/html/MqJICEL/vol3/vol3-1_garner.pdf>. [25 November 2010].
Jaffe, J & Stavins, R 2007, Linking tradable permit systems for greenhouse gas emissions: Opportunities, Implications and challenges, International Emissions Trading Association Report on Linking GGH Emissions Trading Systems. Available from: <http://www.ieta.org/ieta/www/pages/getfile.php?docID=2733>. [25 November 2010].
Montero, JP 2005 “Pollution markets with imperfectly observed emissions”, RAND Journal of Economics, vol. 36, no. 3, pp. 645-660. Available from JSTOR. [25 November 2010].
Sandbag n.d, Rescuing the EU ETS from redundancy, Sandbag Briefing. Available from: <http://www.climnet.org/component/docman/doc_download/1693-rescuing-the-eu-ets-sandbag-report-may-2010.html\>. [25 November 2010].
Stavins, RN 2001, Experience with market-based environmental policy instruments, Resources for the Future. Available from: <http://www.rff.org/documents/RFF-DP-01-58.pdf>. [26 November 2010].
United Nations 1998, Kyoto protocol to the United Nations framework convention on climate change. Available from: <http://unfccc.int/resource/docs/convkp/kpeng.pdf>. [25 November 2010].
United States Environmental Protection Agency – US EPA 2006, Environmental offsets, Position Statement No. 9. Available from: < http://www.epa.wa.gov.au/docs/1863_PS9.pdf>. [25 November 2010].
Wang, Q, Gao, H, Wen, F, MacGill, I & Huang, J 2009, “From command and control regulations to a business proposition: Creating a Chinese market for emissions trading”, International Journal of Energy Sector Management, vol. 3, no. 1, pp. 62-82. Available from: EMERALD. [25 November 2010].
Yeoh, P 2008, “Is carbon finance the answer to climate control?” International Journal of Law and Management, vol. 50, no. 4, pp.189-206. Available from EMERALD. [25 November 2010].