Emmisions trading Permits

Mark Walker

Greg

How it works

• Market-based approach used to control pollution• Different schemes for companies and countries• Provides economic incentives for achieving

reductions in the emissions of pollutants.• The release of emissions occurs

quasiperiodically as a result of global temperature changes.

• Factors such as melting permafrost releasing encapsulated Carbon Dioxide into the atmosphere

• A central authority (generally a governmental organisation) determines a limit on the quantity of a pollutant that can be emitted.

• The limit is allocated to corporations or countries in the configuration of emissions permits which represent the right to discharge a specified volume of particular polluting substances.

• Corporations are required to possess a number of permits equivalent to their emissions. The total number of permits cannot exceed the line of circumvallation, limiting total emissions to that level.

Examples

• Australia – New carbon tax scheme

• Kyoto protocol

• European Union

Kyoto Protocol

• The Kyoto Protocol provides for three mechanisms that enable countries or operators in developed countries to acquire greenhouse gas reduction credits

• The Joint Implementation scheme allows a developed country with relatively high costs of domestic greenhouse reduction would set up a project in another developed country

• The Clean Development Mechanism allows a developed country to sponsor a greenhouse gas reduction project in a developing country where the cost of the project activities is lower, but the atmospheric effect is globally equivalent. The developed country would be given credits for meeting its emission reduction targets, while the developing country would receive the capital investment and clean technology or beneficial change in land use

• Under International Emissions Trading countries which produce little carbon can trade in carbon credits to countries that produce more CO2

European Union

• The EU operates a policy similar to that of the Kyoto protocol however limits for CO2 production are set far lower

• Trading of credits is still permitted however it is more difficult as there are limits set on how many carbon credits can be sold by each country.