The sky problem is as old as civilization itself. Things that belong to everyone -- and to no one in particular -- tend to get overused and abused. This is what has been called the "tragedy of the commons." As the world's economy expands we are approaching real limits to the pollutants that can be dumped into the air.
The solution is to ration the use of the atmosphere as a dump. This is done by allocating limited emission permits - which in turn creates a new property right - the right to emit a given quantity of greenhouse gases. The emission rights thus created are by design, scarce, tradable and, if a tight enough grip is kept to ensure that not too many permits are issued, they will become increasingly valuable. (In the European Union scheme there has recently been a crisis, caused by a sharp fall in the price for permits. Far too many permits to emit have been issued.)
Globally the emissions market encompasses 3 types of system. There are project-based transactions where a buyer purchases certified emission reductions from a project that reduces greenhouse gas emissions compared with what would have happened otherwise. Many of these are in developing countries and are supposed to help provide the funds for the development of these countries. Or that's the theory - the reality of these kind of schemes often fall way behind the ideal. There is also trading of greenhouse gas emissions allowances allocated under what are called "cap-and-trade" regimes. The main
one of these is the European Unions Emissions Trading Scheme. Finally there are 'voluntary carbon markets' set up between groups of companies, for example in the United States and Australia. You may wonder why companies should do this voluntarily - the answer is not pure environmental altruism. The truth is that these companies are staking their claim to ownership of the sky - as the atmospheric commons is enclosed they want to be the ones who part own it. There is big money involved.
Having created permits as a new property right there is an important question of how, and to whom, they should be initially distributed. They could be auctioned by governments. Or they could be given to populations on a per capita basis - though this appears not to have been considered anywhere! At the moment most of the permits in Europe are being given to companies in proportion to their previous emissions. This is called 'grandfathering'. The
result has been a system in which, for example in the UK, a £1billion windfall profit has effectively been given to power generating companies...
A World Bank Report released last week puts the global value of the trade in emission rights at $10 billion in 2005 - a figure that was ten times that of the previous year. The European Union dominates the carbon market in terms of value - with about 75% of the global market - but participation from developing countries is rapidly increasing. How the EU scheme evolves will be critical to the future of world climate politics.
At the moment it isn't doing very well and has a host of problems.....
...come along to the meeting and find out more.....
The Speaker will be Brian Davey