Skip to main content

Trading Emissions Rights

Image result for EU
The European Union initiated its Emissions Trading Scheme in 2005. This was the first large-scale such trading scheme in the world. The idea was to reduce the greenhouse emissions of Europe’s industries in a market-rational manner, and to offer the rest of the world an example of how that is done.

The ETS is also known as the cap-and-trade system. That phrase suggests the good news/bad news split for markets. Bad news: there are regulatory caps on the total amount of specified gases that may be released. Good news: any particular installation can buy allowances from others to cover otherwise prohibited emissions. As a basic matter of economic theory, these allowances should be traded toward their highest and best use, ensuring that the system over all is more efficient than any command and control approach to the problem could be.

Does it work? And for whom?

The system has in fact drawn imitation, in both New Zealand and in Australia. In the U.S., California has its own cap-and-trade program.

The system seems to exist largely at the expense of electricity ratepayers. That feature of the system gives it the appearance of something that is not sustainable.  

At least two recent studies speak to this point. The Oxford Institute for Energy Studies has published a white paper that declares in its very title that “electricity markets are broken” and asks whether they can be fixed. It concludes flatly that “there is no possibility of a long-term self-sustaining low carbon market based on the mixture of sources envisaged by governments.”

Separately, the Manhattan Institute has posted an “issue brief” entitled: “What Happens to an Economy When Forced to Use Renewable Energy?” This brief, by Robert Bryce, a senior fellow, seems directly relevant to what really counts as socially responsible investing. After all, it is a priori reasonable that investing in a way that helps keep electrical rates reasonable is both wise and sustainable. 



Comments

  1. You may be eligible for a new solar program.
    Find out if you are qualified now!

    ReplyDelete
  2. eToro is the ultimate forex trading platform for new and established traders.

    ReplyDelete

Post a Comment

Popular posts from this blog

Hume's Cutlery

David Hume is renowned for two pieces of cutlery, the guillotine and the fork.

Hume's guillotine is the sharp cut he makes between "is" statements and "ought" statements, to make the point that the former never ground the latter.

His "fork" is the division between what later came to be called "analytic" and "synthetic" statements, with the ominous observation that any books containing statements that cannot be assigned to one or the other prong should be burnt.

Actually, I should acknowledge that there is some dispute as to how well or poorly the dichotomy Hume outlines really maps onto the analytic/synthetic dichotomy. Some writers maintain that Hume meant something quite different and has been hijacked. Personally, I've never seen the alleged difference however hard they've worked to point it out to me.

The guillotine makes for a more dramatic graphic than a mere fork, hence the bit of clip art above.

I'm curious whe…

A Story About Coleridge

This is a quote from a memoir by Dorothy Wordsworth, reflecting on a trip she took with two famous poets, her brother, William Wordsworth, and their similarly gifted companion, Samuel Taylor Coleridge.



We sat upon a bench, placed for the sake of one of these views, whence we looked down upon the waterfall, and over the open country ... A lady and gentleman, more expeditious tourists than ourselves, came to the spot; they left us at the seat, and we found them again at another station above the Falls. Coleridge, who is always good-natured enough to enter into conversation with anybody whom he meets in his way, began to talk with the gentleman, who observed that it was a majestic waterfall. Coleridge was delighted with the accuracy of the epithet, particularly as he had been settling in his own mind the precise meaning of the words grand, majestic, sublime, etc., and had discussed the subject with William at some length the day before. “Yes, sir,” says Coleridge, “it is a majestic wate…