There are valid economic arguments on either side of the carbon tax vs. cap-and-trade debate. If implemented properly, either policy instrument could accomplish the goal of pricing carbon and gradually reducing greenhouse gas emissions.
One common conclusion after the Canadian Liberal Party's electoral drubbing is that a carbon tax will never sell. It is deemed a political loser, because of the public's knee-jerk reaction to any invocation of that dirty little three-letter word. People much prefer the idea of industrial caps on emissions and a market system. Let the market solve the problem, not the government is a common refrain.
Right. How well are our markets do today?
There's a reason that many of the major investment banks from Goldman Sachs on down are in favour of establishing a carbon market. And it ain't polar bears or coral reefs. They see a massive opportunity for profit in trading of carbon permits.
It is incredibly naive to think the same problems that sunk the financial system won't arise in a carbon market. This article from the Wall Street Journal investigating sales of landfill "carbon offsets" on the voluntary Chicago Carbon Exchange offers a window into how profit-seeking would win out over greenhouse gas reductions in a freely traded carbon market.
I'm not against a cap-and-trade system. But we need to wake up and realize that a carbon trading system will be fraught with the very complications that have created and burst financial bubbles in the past twenty years. Traders will come up with complicated derivatives and trading instruments that regulators do not understand. Companies will propose offsets and reduction measures that cannot be guaranteed. And so on and so on.
Sure, a carbon tax may look like a political loser. Given the way lack of regulation and open cross-border financial trading is causing a meltdown of the global financial system, is the really public is willing to open a multi-billion or trillion dollar carbon trading system, not to mention the future of the planet, in the hands of the markets and investment firms?
Call me crazy, but I think the Liberals should save the Green Shift from the shredder.
Wednesday, October 22, 2008
Market meltdowns and the drawbacks of trading carbon
Sunday, August 03, 2008
The future of carbon offsets
The carbon offset game is fraught with problems. A myriad of companies now promise to offset your personal emissions through activities like protecting forests, planting trees and investing in renewable energies. Even for the most responsible and earnest of companies, the emissions reductions are difficult to quantify or verify. And many of the offset schemes fail to prevent “downstream” emissions that counteract the offsetting activity. For example, if a well-intentioned company protects the right area of the right forest from logging to “prevent” the designated amount of carbon dioxide from being released to the atmosphere, but there is no equivalent change in pulp and paper use, a forest has to be logged elsewhere to meet demand.
Here's a possible solution: Rather than pay to have a company attempt to physically offset the emissions, Carbon Retirement lets you purchase and “retire” carbon credits from the European emissions trading network. By removing those carbon credits from the market, your purchase permanently lowers the total emissions cap in the trading system. This guarantees that companies subject to the trading system will reduce emissions by the designated amount (presuming emissions are properly measured and reported within the trading system). As more trading schemes emerge – Canada, the United States and Australia are all considered trading schemes – the "retirement" method could to revolutionize, and legitimize, the consumer offset game.
[Note: I have no connection to the company. I like the concept. If other similar companies may exist, you are welcome to add links in the comments.]
Wednesday, September 05, 2007
To offset or not to offset
There is lots of furor over the ethics and the efficacy of carbon offsets. Personally, I doubt the validity of many of the offsets; it is a mystery how there can be be so many opportunities to purchase carbon offsets today, yet at the same time, few major programs that are substantially reducing greenhouse gas emissions. When asked, I sometimes suggest people look at purchasing offsets (from certain organizations not these lunatics) like donating money to a worthwhile cause.
Bad advice? Gar Lipow at Gristmill picked up on this story in the Times of London that makes it seem as though offset business is on a slippery slope to slavery :
When David Cameron flew to India to open a JCB factory for a party donor, green-thinking supporters could rest assured that his visit would be carbon neutral. “We are offsetting all our emissions through Climate Care,” the Tory leader wrote on his blog. “As well as planting trees, they also invest in renewable energy projects in the developing world.”
Somewhere in the Indian countryside, a farmer is about to repay Mr Cameron’s debt to the planet. Climate Care’s latest enterprise is to provide “treadle pumps” to poor rural families so they can get water on to their land without using diesel power. The pumps are worked by stepping on pedals. If a peasant treads for two hours a day, it will take at least three years to offset the CO2 from Mr Cameron’s return flight to India.
If nothing else, that paragraph captures the vast income inequality. Let the angst and arguing begin.
Thursday, August 16, 2007
Reporting and promoting science
Science sells these days. In the push for advertising dollars and readership, the conventional and electronic media strive to link new scientific results to the pressing issues of the day.
And, to be fair, in the push for tenure and grant dollars, we academics can be guilty of the same. The holy grail used to be getting a paper in Nature or Science. Now it is getting a paper in Nature or Science so that the paper will be reported on CNN or the BBC.
The intent, in either case, can be benign. A lot of the published science today, on subjects like climate change, is important news. But in the effort to "frame" - to use the terminology in the Matt Nisbet and Chris Mooney article that created buzz earlier this year - science for public and political consumption, a lot of mistakes are being made. It ranges from the inaccurate reporting and questionable publicity of the mythical lake that would resolve the very real crisis in Darfur to outright abuse of statistics to throw stones at solid science.
Take these three recent headlines... please.
1
I call this is a "false positive". There's been a huge and unnecessary uproar over the discovery of a minor mathematical error in the NASA GISS historical temperature dataset. The error means that 1998 was no in fact the warmest year in US history, but is tied with 1934. As the NASA scientists themselves report (pdf), the error has a negligible impact on the global temperature, no impact on global rankings of the warmest years, and absolutely no impact on the evidence for human influence on the climate (see Tamino or Realclimate for details).
2) Warming will pause then full steam ahead, scientists contend
This is the "we didn't read the whole paper". These reports of a "global warming" forecast for the next decade come from a innovative short-term climate modeling study published in Science. The goal of the study was to test the ability to predict climate on decadal or shorter time-scales, a specially developed climate model that explicitly considers the frequency of large-scale atmosphere-ocean oscillations like El Nino (see Tamino). At the end of the study, after a lengthy model validation against observed data from the recent past, the authors discuss the model's predictions for the next ten years, stressing they are contingent on stochastic variables like the occurrence of El Ninos. The headlines made it seem as though the scientific community had confidently concluded that 'warming will pause' for a couple years.
3) Trees won't fix global warming
And finally, "we just didn't understand the paper". The headlines are based on research, presented at last week's ESA meeting, from Duke University's Free Air Carbon Enrichment (FACE) site, where scientists have been testing the effect of higher CO2 levels on tree growth for the past ten years. In the past, scientists had thought that higher atmospheric CO2 would effectively 'fertilize' plants. The Duke experiments showed that this fertilization effect was limited by the availability of water and nutrients (press release). In an effort to link the result to a public issue - carbon offsets - the media stories reported that new research shows planting trees won't work to combat global warming. In other words, planting trees won't take up ANY carbon. Of course it would; all that wood is made of carbon, where else could it come from? The Duke research only showed that there won’t be an extra growth bump because there’s more CO2 levels in the air, not that there won't be any growth at all.
This is the danger of popularizing science. As we saw with the coverage of the Darfur Lake, more attention was given to the initial headline than to the later reports that the 'lake' did not in fact hold any water. Unfortunately, with such quick turnaround in reporting, it is vital that all of us, the one's doing the research, the one's writing the press releases and the one's writing the news story, get it right the first time. It's not a trivial task. But otherwise, these misrepresentations (about global temperature) or misintepretations (about short-term climate prediction) or mistakes (about trees and carbon) make it into the public consciousness.
