A true global carbon trading marketplace may finally be within the world’s grasp, fifteen years after the Kyoto protocol was signed and just months after being extended. According to environmental wellness experts, a line of dominos has suddenly appeared, with the slightest push being the only thing needed to set off a chain reaction. When this happens, we could suddenly have a powerful and effective tool to reduce carbon emissions.
About 45% of global carbon emissions come from electricity generating power plants that burn fossil fuels. The idea behind emissions trading is that, by mandating limits on carbon emissions, a robust market will be created as cleaner plants seek to sell their unused allowances. This gives plants an economic incentive to run cleaner, as dirty power plants will have to pay cleaner power plants for rights to emit.
One difficulty this plan has had is that, the US, which is responsible for 25% of emissions, never ratified Kyoto. The EU, Asian and Australian exchanges will only be able to offer patchwork regional solutions without American participation and leadership, but climate change is a global problem at its core. Experts began to doubt if emissions trading would ever fulfil its potential, as the US continued in their refusal to ratify Kyoto and make a commitment to reduce emissions, and developed nations displayed spotty enthusiasm for the second round of Kyoto commitments.
However, emissions trading schemes are now emerging organically in the US, from various individual states. Also, the discovery of vast reserves of natural gas in the US is sparking a shift in the power generation industry, with oil losing out as the preferred source of fuel. Affordable alternatives are in the wings, and so the reluctance among regulators and governments to impose emissions limits is easing.
If the current US administration uses its recently-given right to curb carbon emissions, the price of American, EU, Australian and Asian carbon emissions will converge, strengthening all of these markets in their mission of making money while cleaning the environment. The developed world can’t clean up the globe on its own, but it can create market conditions that make reduction in carbon emissions an economic priority for every nation, with environmental stewardship being a new measuring tool for GDP.
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