Wednesday, May 31, 2006

Is carbon offsetting a real solution?

Can the market be the way forward in the fight against climate change, or is carbon trading simply a license to pollute? It's a question that RealClimate.Org is better qualified than I to answer. :::[Buying a stairway to heaven?]

Compliance with Kyoto, a mere 5% reduction in carbon emissions, was forecast by Nordhaus [2001] to cost a few percent of GDP globally. The cost to stop emission completely and immediately may not even be calculable. promises zero net emissions, for a fraction of 1% of the average U.S. income. Can this possibly be real, or are we talking indulgences and snake oil?

The idea behind carbon offsets is built upon the foundation of carbon emissions trading established by the Kyoto Protocol, a scheme called cap and trade. Carbon emissions for industries are capped at some level by regulatory permits to emit CO2.
If a company is able to cut its emissions below that level, it can sell its emission permits to another company. The cuts in emissions are thereby steered, by the invisible hand of the market, to the cheapest and most efficient means. Cap-and- trade has worked well for reduction of sulfur emissions in the U.S., that are responsible for acid rain. CO2 emission is intrinsically even better suited for cap- and-trade, because it is a truly global pollutant, so it matters not where the CO2 is emitted.

The carbon emissions market requires a certification process to verify any reduction in carbon emissions. and the other similar operations take donations from people like me and use the money to pay for renewable energy sources like solar cells or wind farms, that would not have been built otherwise. For these efforts, they receive credits for reduction in carbon emissions that are certified as valid, and therefore eligible for trade in the emissions market. Instead of trading that emission credit, "retires" it, so that it isn't used to balance higher carbon emission from another source. The certification process from the emissions market has an unintended benefit of providing an independent way to verify the carbon impact from sending money to organizations like It's a nifty idea.

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