Emissions Trading
How emission trading came about
Many changes in how Greenhouse Gases (GHG's) are being treated are due to policies proposed at
UNFCCC conferences held at Rio de Janeiro, Kyoto,
Buenos Aires, and other places. This convention meets to address the growing suspicion
that some gases are trapping heat in earth's atmosphere, possibly altering normal
climate behavior.
Emissions trading was introduced as a means to lower the global production of greenhouse gases.
Recent US proposals to build capacity for this new sector are the Climate Stewardship
act and other legislation.
Emissions trading does not mean an exemption from reductions. Trading moves an emission
reduction from one place to another, while participants report their reduction
schedule. A global accounting system keeps track of what trades were made and wether participants are meeting
their reduction targets.
How emissions trading is applied
Over 30 countries
have agreed to reduce annual greenhouse gas emissions by an average of
7%. These countries (so called Annex countries)
can trade ERC's with each other to level out the cost
of achieving emission reductions. For example, a country where there is plenty wind can put up
turbines, generate large amounts of emissions free energy and sell the reduction credits to a country
where there is less wind and possibly higher costs to achieve reductions with similar turbines.
Each country reports yearly to the IPCC its total emissions and
emission reductions. If they are on track with their reductions, they maintain trading
privileges. If not, penalties or sanctions may be imposed.
Not all countries have committed to emission reduction
schedules. These countries are not sure how
to achieve reductions and still grow their economies without hurting
themselves. To enable
reductions in this second group of countries, one-way trades are permitted.
For example,
a wind-farm is placed in India, and the credits are automatically transferred to Denmark,
where the money for the project came from. So bi-lateral trading is OK between the group with
emission reduction commitments, and the second group without commitments.
Rules and modalities
Key to emissions trading is keeping track of what is being traded. Rules defining
reporting measures, compliance standards etc., are being agreed upon, and soon
there will be an internationally recognized game plan.
The ICBE is anticipating this market and documenting RE systems and the emissions they
reduce. We expect that many RE producers will be able to claim benefits when domestic
and international trading schemes start up.
For further reading:
resources
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