Cap and Trade - It's the Way

I went to two talks over the past week on carbon trading.

The first was in London hosted by E-Factor with the Key Note speaker was Peter Fusaro of Global-Change a New York based energy consultancy and hedge fund advisor. He was championing the cause of freeing up the markets to address climate change with governments first establishing a regulatory framework for carbon trading with challenging limits on carbon emissions, which can be ratcheted down over time, and a stringent monitoring and enforcement function.

This would provide a secure environment in which companies would be keen to invest in the application of current and development of new technologies to achieve rapid carbon reduction. I tend to agree with him. Appeals to individual conscience to reduce carbon emissions will only work with a small proportion of the populace, not because they are not moral, but they are busy just trying to manage their own lives and their families. Energy saving will comes further down their priority list and will reach he top only when it is too late for the climate and then they may well not know what to do.

By using the price mechanism through cap and trade you get industry involved, which will bring huge investment and then the consequent price signal will mean that people have to take notice.

The EU Emissions Trading System may have stumbled in its first faced but these are just set up issues and can be addressed in the next round which started this year. Mr F says that the US will set up their own scheme within 18 months to 2 years once the new administration is settled in. Bringing the US on board in the war on climate change is essential if anything meaningful is to be achieved. The Regulation and market combination is the most powerful mechanism we have to change things. We may wish we can appeal to people's better nature but we do not have the time and when it comes to the crunch it likely does not work.

The other presentation was in Cambridge by Ben Castle from the RSA. It was about Personal Tradable Carbon Allowances. While the project and discussion was quite illuminating in the issues involved and this may eventually be a useful way of ensuring worldwide equity on carbon emissions (e.g. one tonne each, it would be too complicated to establish and for individuals to manage their allowance. Far better to start with company cap and trade and perhaps move to individuals if this ever proves necessary.

My conclusion is that I will firmly put my foot in the cap and trade camp while working for local initiatives and national policy change to reduce carbon emissions and improve quality of life.