Trading on Carbon: How Markets Will Save the World

Deck: 

Utilities should plan for U.S.-wide CO2 emissions restrictions that will be more effective than state efforts.

Fortnightly Magazine - January 2007
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If carbon dioxide (CO2) emissions restrictions are mandated at a federal level, the method almost certainly will be a cap-and-trade system based on both the European Union and United States emissions trading systems. A cap-and-trade system likely will be chosen over other alternatives for four fundamental reasons: 1) dramatic success of the U.S. SOx and NOx cap-and-trade systems; 2) compatibility with other regional trading frameworks; 3) economic efficiency in distributing credits, and; 4) business acceptance due to flexibility of abatement options.

The U.S. SOx and NOx cap-and-trade system, implemented in 1995, has been hailed widely as a success and has familiarized U.S. companies with emissions trading. However, the major problem with the SOx/NOx program is that it does not restrict a local geographic concentration of polluting sources. SOx and NOx are “local pollutants” that cause the most damage when concentrated within a specific geography. The problem of local concentration does not apply to CO2, since CO2 restrictions are designed to reduce global rather than local concentrations of atmospheric CO2.

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