By Jessie Blaeser
A carbon marketplace would put a price on emitting carbon into the atmosphere. The idea behind the proposed system is simple: turn carbon into a commodity in order to reduce global emissions. The execution, however, is not so easy. Advocates argue a carbon market will incentivize innovation, while critics say the system is not effective enough on reducing global emissions. Furthermore, the system is known to place a strain on lower-income groups. Do you think a carbon marketplace has the potential to save the environment?
By making carbon into a commodity like any other, global trade and economics could impact the environment for the better. Per the World Economic Forum:
...economists came up with the idea of trading the right to pollute, creating a financial incentive to curb emissions.
Within a carbon marketplace, companies will sell their “right” to creating CO2 to companies who cannot avoid it. Businesses are issued their “right to pollute” via permits, of which there is a limited supply that decreases over time. The idea is that as the number of permits decreases, companies are incentivized to create new technologies to avoid the need to purchase permits whatsoever:
The number of available permits decreases over time, putting pressure on the participating companies to invest in cleaner production options and reduce their CO2 outputs. In the long run, this fuels innovation and drives down the price of new technologies.
The World Economic Forum concludes with a footnote:
Broader criticisms of carbon trading include concerns that it has proven ineffective - some offset schemes even counterproductive - and it disproportionately affects lower income classes.
In California, the cap-and-trade program was one of the world’s first carbon marketplaces. But according to ProPublica:
...while the state’s program has helped it meet some initial, easily attained benchmarks, experts are increasingly worried that it is allowing California’s biggest polluters to conduct business as usual and even increase their emissions.
After analyzing state data, ProPublica found that carbon emissions from California’s oil and gas industries rose 3.5 percent since the program’s inception.
Experts say cap and trade is rarely stringent enough when used alone; direct regulations on refineries and cars are crucial to reining in emissions. But oil representatives are engaged in a worldwide effort to make market-based solutions the primary or only way their emissions are regulated.
Per Bloomberg, although COP25 (the UN climate change conference) failed to put plans into action, a carbon marketplace was the top line item of discussion:
Carbon market advocates say trading mechanisms could shave $320 billion a year off the cost of reducing emissions by helping countries and companies identify the most efficient projects.
According to Bloomberg, 2019 marks the second COP unable to come to an agreement on carbon markets—a disappointment to governments and businesses.
Some believe COP25′s inability to come to an agreement on a carbon market is for the better. According to Time’s Ciara Nugent:
Protesters have disrupted the conference to highlight the risks of a market system, which they say distracts from the need for all greenhouse gas emissions to stop, in every country, as soon as possible.
In other words, many activists worry a carbon marketplace will not only act as a surface-level solution, but it will also distract from other urgent changes like reducing or eliminating the need for fossil fuels:
...many say that in the long term the credits bought in carbon markets are just a distraction from the fundamental need for all countries to transition off fossil fuels.
Furthermore, the decision to create a worldwide carbon marketplace would have massive impacts on people, not just on corporations. According to OPAL, an environmental justice organization:
In addition to taking lands from tribes, carbon trading harms communities who live near polluters. Often these are communities of color and low-income families. Under California’s cap and trade bill, emissions increased in frontline communities in close proximity to refineries, which also means increased exposure to toxics and particulate matter (PM10 and PM2.5), known as co-pollutants.
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