Chip Taylor

Emission credit trading -- not a true market

An article in the New York Times makes the point that emission credit trading doesn't really work to reduce emissions without a cap on total emissions:

[S]uccessful trading has been confined to a handful of pollutants emitted by a relatively small number of businesses that must comply with specific emissions caps set by the government. Most policy experts are dubious that such trading can solve a global problem affecting a wide range of gases and industries, particularly if the United States, the world's largest emitter of such gases, refuses to set any caps.

"From an economic view, emissions aren't a true market," said Peter Fusaro, chairman of Global Change Associates, an energy and environmental risk consulting service. Without regulated caps, and penalties for failure to comply, companies have no way to know what an investment in curbing them is worth, according to Mr. Fusaro and other experts.

Rather than a true market, cap and trade systems are a way to use market processes to meet a (hopefully not too) arbitrarily set overall emission cap.