The New Yorker has published an illuminating article on carbon emissions and carbon “cap and trade” systems, which shares the example of the successful reduction in sulfur emissions to illustrate how carbon emissions could be reduced. The passage of the Clean Air Act in 1990 mandated massive acid-rain reductions, and created a market for sulfur-dioxide emissions that forced companies to “pay to pollute”. Once a cost was associated with sulfur-dioxide emissions, companies could save money by installing scrubbers. Emissions were reduced from eighteen million tons to nine million, and acid rain evaporated as an environmental problem. Cap and trade is already happening, at the Chicago Climate Exchange (CCX), where carbon futures are traded like pork bellies.
“…CCX members buy and sell the right to pollute. Each makes a voluntary (but legally binding) commitment to reduce emissions of greenhouse gases—including carbon dioxide, methane, and nitrous oxide—and hydrofluorocarbons. Four hundred corporations now belong to the exchange, including a growing percentage of America’s largest manufacturers. The members agree to reduce their emissions by a certain amount every year, a system commonly known as cap and trade. A baseline target, or cap, is established, and companies whose emissions fall below that cap receive allowances, which they can sell (or save to use later). Companies whose emissions exceed the limit are essentially fined and forced to buy credits to compensate for their excess.” — Michael Specter, The New Yorker
This isn’t just a method for punishment and reward. Establishing a carbon market allows money to flow toward developing the new energy technologies that will help companies save money. And if Silicon Valley is ever going to become “Solar Valley”, as some have predicted, the money needs to flow. Obama, Clinton and McCain are all advocating a cap and trade system.