Carbon Trading

Enthusiasm is spreading for cap and trade systems to regulate the amount of carbon dioxide (CO₂) emitted to Earth's atmosphere. In 1990, the U.S. Environmental Protection Agency set a limit on sulfur dioxide (SO₂) emissions from obvious point sources and allowed those who emit less than their quota to trade excess allowances. As a result, regional acid deposition was dramatically reduced. Can the world do the same for CO₂ ? Fundamental differences in the bio geochemistry of SO₂ and CO₂ suggest that establishing a comprehensive, market-based cap and trade system for CO₂ will be difficult. For SO₂, anthropocentric point sources (largely coal-fired power plants), which are relatively easy to control, dominate emissions to the atmosphere.

Natural' sources, such as volcanic emanations, are comparatively small, so reductions of the anthropocentric component can potentially have a great impact, and chemical reactions ensure a short lifetime of CO₂ in the atmosphere.CO₂ , in contrast, comes from many distributed sources, some sensitive to climate, others sensitive to human disturbance such as cutting forests. It is thus impossible to control all of the potential sources. combustion are one of the smaller components of the atmospheric flux of CO₂. which is dome• noted by exchange between forests and the oceans. During most of the past so,000 years, the uptake and loss of CO₂ from forests and the oceans must have been closely balanced, because atmospheric CO₂  showed' little variation until the start of the Industrial Revolution. CO, from coal, oil, and natural gas combustion now comics from many segments of society. including electric power generation, industry, home heating, and transportation. Unbalanced by equivalent anthropological sinks for carbon, fossil fuel emissions account for the vast majority of the rise of CO₂ in Earth's atmosphere. Caps on emissions, like those instituted for SO₂ ,will be difficult to institute if the burden of reducing CO₂  is to be borne equally by all emitters. Because land plants take up CO₂  in photo syn• thesis and store the carbon in biomass, forests and soils seem to be attractive venues to store CO₂ . Market•based schemes propose substantial payments and credits to those who achieve net carbon storage in forestry and agriculture, but these projected gains are often small and dispersed over large areas. Carbon Trading news in freshsciencenews
 We will need to net any such carbon uptake against what might have occurred without climate-policy intervention. Conversely, will Canada and Russia be billed for incremental CO₂  releases that stem from the warming of cold northern soils as a result of global warming from the use of fossil fuels worldwide? If credit is given to those who choose not to cut existing forests, the increasing total demand for forest products will shift deforestation to other areas.

Carbon Trading Over Taxes

As the United States moves inevitably toward climate legislation, discussion has shifted from the science to the policy options for slowing emissions of carbon dioxide CO₂ and other greenhouse gases. Some favor a tax on CO₂ emissions—referred to as a C tax (r). Others favor government subsidies (2). If high enough to alter consumer behavior, a carbon tax would reduce emissions by raising the effective price of carbon-intensive energy relative to carbon-free sources. Subsidies may speed development of specific, targeted low-C technologies. But a market-based system with an economy wide cap on emissions and trading of emission allowances would do the same, while having distinct advantages 0). Most important, a cap and trade system, coupled with adequate enforcement, would assure that environmental goals actually would be achieved by a certain date. Given the potential for escalating damages and the urgent need to meet specific emission targets (4), such certainty is a major advantage. A federal cap and trade system could be incorporated into existing emissions-trading frame-works and markets, such as the Kyoto Protocol's international market or sub rational ones like the Regional Greenhouse Gas Initiative. Earth's climate is agnostic about the location and type of CO₂ emissions and is sensitive only to the total burden of CO₂ It makes sense, therefore, to design a climate policy that taps all possible avenues to limit net  CO₂ emissions. Trading of emissions Science news articles across all sectors of the economy addresses this by allowing emitters to purchase carbon offsets from businesses that are able to lower their own emissions below their allocation. If trading were incorporated into an international system, U.S. firms and consumers could meet emissions targets at reduced costs by substituting less expensive cuts in, for example, developing countries, for expensive emissions cuts in the United States. Because investment would be funneled to technologies that reduce CO₂ emissions at the least ant, the overall expense of the program would be minimized. Cutting emissions of pollutants is admittedly notes  complicate crosscutting      CO₂        emissions, and transaction costs can be a factor. Nevertheless, the United States was able to reduce sulfur oxide emissions ahead of schedule and at 30% of the projected cost using a market-based cap and trade system (5). Elimination of lead from gasp. line and phaseout of ozone-depleting chemicals were also facilitated by emissions-trading programs. 

A Guide to Sequestration

Climate change concerns may soon force drastic reductions in carbon dioxide CO₂ emissions. In response to this challenge, it may prove necessary to render fossil fuels environmentally acceptable by capturing and sequestering CO₂  until other inexpensive, dean, and plentiful technologies are available. Today's fossil fuel resources exceed 5000 megatons of carbon (GT C) (I), compared with world consumption of 6 Gt C /year, assuring ample transition time. However, by 2050, the goal of stabilizing the atmospheric CO₂   con, cent ration while maintaining healthy economic growth may require "carbon-neutral" energy in excess of today's total energy consumption (2). Lowering world CO₂ emissions to 2 GT C/year 

 Estimated storage capacities and times for various sequestration methods science daily. The "fossil carbon" range includes at its upper end methane hydrates from the ocean floor. The "oxygen limit" is the amount of fossil carbon that would use up all oxygen available in air for its combustion. Carbon consumption for the zits century ranges from 600 Gt (current consumption held con-stent) to 2400 Gt. "Ocean acidic" and "ocean neutral" are the ocean's uptake capacities for carbonize acid and neutralized carbonize acid, respectively. The upper limits of capacity or lifetime for underground injection and mineral carbonates are not well constrained. 

Preparing to Capture Carbon

Carbon sequestration from large sources of fossil fuel combustion, particularly coal, is an essential component of any serious plan to avoid catastrophic impacts of human-induced climate change. Scientific and economic challenges still exist, but none are serious enough to suggest that carbon capture and storage will not work at the scale required to offset trillions of tons of carbon dioxide (COR) emissions over the next century. The challenge is whether the technology will be ready when society decides that it is time to get going. Strategies to lower CO2 emissions to mitigate climate change come in three flavors: reducing the amount of energy the world uses, either through more efficient technology or through changes in lifestyles and behaviors; expanding the use of energy sources that do not add to the atmosphere; and capturing the CO2 from places where we do use fossil fuels and then storing it in geologic repositories, a process known as carbon sequestration. A survey of energy options makes clear that none of these is a silver bullet. The world's energy system is too immense, the thirst for more and more energy around the world too deep, and our dependence on fossil fuels too strong. All three strategies are essential, but the one we are furthest from realizing is carbon sequestration. The crucial need for carbon sequestration can be explained with one word: coal. Coal produces the most CO2 per unit energy of all fossil fuels, nearly twice as much as natural gas. And unlike petroleum and natural gas, which are predicted to decline in total production well before the middle of the century, there is enough coal to last for centuries, at least at current rates of use, and that makes it cheap relative to almost every other source of energy (Table r). Today, coal and petroleum each account for roughly 40% of global CO2 emissions. But by the end of the century, coal could account for more than 80%. Even with huge improvements in efficiency and phenomenal rates of growth in nuclear, solar, wind, and biomass energy sources, the world will still rely heavily on coal, especially the five countries that hold 75% of world reserves (see (6)): the United States, Russia, China, India, and Australia (1). As a technological strategy, carbon sequestration need not apply only to coal plants; indeed, any point source of CO2 can be sequestered, including biomass combustion, which would result in negative emissions. latest tech fresh news Carbon sequestration uptake through reforestation or fertilization of marine photo plankton. But the potential to enhance bio-logical uptake of carbon pales in comparison to coal emissions, ever more so as India, China, and the United States expand their stock of coal-fired power plants. So developing and deploying the technologies to use coal without releasing CO2 to the atmosphere may well be the most critical challenge we face, at least for the next too years, until the possibility of an affordable and completely non—fossil energy system can be realized. 

Critical Assumptions in the stern

 In November 2006, the British government presented a comprehensive study on the economics of climate change , the Stem Review. It painted a dark picture for the globe: 'III we don't act, the overall costs and risks of climate change will be equivalent to losing at least 5% of global GDP [gross domestic product] each year, now and forever. If a wider range of risks and impacts is taken into account, the estimates of damage could rise to 20% of GDP or more." The Stem Review recommended urgent, immediate, and sharp reductions in greenhouse-gas emissions. These findings differ markedly from economic models that calculate least cost emissions paths to stabilize concentrations or paths that balance the costs and benefits of emissions reductions. Mainstream economic models definitely find it economically beneficial to take steps today to slow warming, but efficient policies generally involve modest rates of emissions reductions in the near term, followed by sharp reductions in the medium and long term (2-5). A standard way of showing the stringency of policies is to calculate the ''carbon tax," or penalty on carbon emissions. A recent study by the author estimates an optimal carbon tax for ions of about $30 per ton carbon in today's prices, rising to $85 by the mid-21st century and further increasing after that (5). A similar carbon price has been found in studies that estimate the least-cost path to stabilize carbon dioxide concentrations at two times protein dust rial levels (2). The sharply rising carbon tax reflects initially low, but rising, emissions reduction rates. We call this the climate-policy ramp, in which policies to slow global warming increasingly tighten or ramp up over time. A $30 carbon

 Comparing the optimal carbon tax under alternative discounting assumptions. Integrated model of clinical trials news. Climate and the Economy (DICE model) (5) integrates the economic cods and benefits of greenhouse gases (Gig) reductions with a simple dynamo representation of the scientific and economic links of output, emissions, concentrations, and clip' mate change. The DICE model is designed to choose levels of investment in tangible capital and in Gallic re:Inchon% that maximize economic welfare. It calculates the optimal carbon tax as the price of carbon emissions that will balance the incremental of abating carbon emissions with the incremental benefits of lower future damages from climate change. Using the DICE model to optimize climate policy leads to an optimal carbon tax in boos of around Ssh per ton carbon (shown here as 'DICE baseline). If we substitute the Stern Review-s assumptions about tune astounding and the consumption elasticity into the DICE model, the calculated optimal carbon tax is much higher and rises much more rapidly (shown as 'Stern assumption:). tat may- appear to he a modest target. but it is at least to times the current globally averaged carbon tar implicit in the Kyoto Protocol (shown as Stern assumptions). What in the logic of the ramp? In a world when- capital la productive and damages are far in the fun in (see chart affirm). the highest. return investments today are primarily in Ian. gable, nontechnical. and human capital. In the inning decade.. damages are predicted to rise relative to output. As that occurs. rt becomes efficient to shift investment toward more intensive emissions reductions and the IRK COM paying higher carbon taxes. The exact time  of emissions reductions depends on details of emit. damages, learning, and the extent In which climate change and damages are nonlinear and semitrailer. The Stern Review proposes to rime Ill to inn table for emissions reductions slur . forward. It suggests global emulsions reductions of between yo% and 70%  the neat two decades. °bin-Me consistent with a carbon tat of about  per ton today. or about to times the level mg. Rested by standard economic models. Green that the Stern Review embraces . traditional economic techniques such as those described in it-t). how does 0 get such differ.  results and strangles, Flaying analyzed the Stern Review in (6) 'which also contains a list of recent analyses). I find that the difference sterns ah nowt emirs-Is-from Its technique for cal. cabling disgusting rates and only marginally on new science or economics. The reasoning has questionable foundations in terms of its ethical assumptions and also leads to economic results that are inconsistent with market data. Some background on growth economics and discounting concepts I. necessary to under-stand the debate. monogramming alternative trajectories for emissions reductions. the key  variable is the real return on capital. which measures the net yield on investments in capital. education. and technology. In principle. this is observable in the marketplace. For rumple. the real pretax return on U.S. snipe rate capital over the last four decades has aver-aged about 0.07 per year. Estimated real returns on human capital range from 0.06 to > 0.20 per year, depending on the country and time period (7). The return on capital is the "discount rate" that enters into the determination of the efficient balance between the cost of emissions reductions today and the benefit of reduced climate damages in the future. A high return on capital tilts the kids science magazines balance toward emissions reductions in the future, whereas a low return tilts reductions toward the present. The Stern Review's economic analysis recommended immediate emissions reductions because its assumptions led to very low assumed real returns on capital. Where does the return on capital come from? The Stern Review and other analyses of climate economics base the analysis of real returns on the optimal economic growth theory (8, 9). In this framework, the real return on capital is an economic variable that is determined by two normative parameters. The first parameter is the time discount rate, denoted by p, which refers to the discount on future utility or wel-fare (not on future goods, like the return on capital). It measures the relative importance in societal decisions of the welfare of future generations relative to that of the current generation. A zero discount rate means that all generations into the indefinite future are treated the same; a positive discount rate means that the welfare of future generations is reduced or "discounted" compared with nearer generations. Analyses are sometimes divided between the ''descriptive approach," in which assumed discount rates should conform to actual political and economic decisions and prices, and the "prescriptive approach," where discount rates should conform to an ethical ideal, sometimes taken to be very low or even zero. Philosophers and economists have conducted vigorous debates about how to apply discount rates in areas as diverse as economic growth, climate change, energy, nuclear waste, major infrastructure programs, hurricane levees, and reparations for slavery. The Stern Review takes the prescriptive approach in the extreme, arguing that it is indefensible to make long-term decisions with a positive time discount rate. The actual time discount rate used in the Stern Review is 00.01 per year, which is vaguely justified by estimates of the probability of the extinction of the human race.