Kyoto and CO2: The world's strangest market takes shape

[Quetzal]

Kyoto and CO2: The world's strangest market takes shape

PARIS (AFP) - They trade in something that is colourless and odourless, cannot be tasted or felt. And whether they buy or sell, no merchandise will ever change hands.

But if all goes well, a decade from now these pioneers in the Kyoto Protocol (news - web sites)'s carbon market will be the commanding players in a business worth billions, possibly tens of billions, of dollars per year.

The market is one of three incentives under the UN pact aimed at easing the cost of reducing carbon dioxide (CO2) pollution, the main culprit for global warming.

Under Kyoto, 38 industrialised countries -- now 36, with the refusal of Australia and the United States to ratify it -- pledged to limit their output of greenhouse gases by a deadline of 2008-12.

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Kyoto and CO2: The world's strangest market takes shape

[izzie]

1. Do not laugh Maine had some of this business,

Even the husband of Snowe was mixed up with it. One group of school children made some money and bought 'pollution stocks' and took them off the market. Works like this from what I could see and at first I did not believe it. Plant A pollutions is high so it goes over what the govt. tells it can do but plan B has little pollutions so Plant A buys Plant B pollution stocks and can keep pollution at the right number.Kids buying up some of the 'stock' takes the over all number down. Plant A can keep up it pollution and Plan B can not get into the market any more as Plant A has taken over. I just could not believe the whole thing but there were these kids on TV having bought the 'stocks' or chits. I do not recall how it was rated on who could do what but our Governor, Snow n's husband, got into it before she took him to DC for some nice paying job.

[PeaceForever]

2. It's a brilliant idea, making it PROFITABLE to reduce environmental harm.

I really wish the idea of pollution credits would get more consideration from people. I know the idea originated with some free market academics, but that does not automatically make the idea bad.

[German-Lefty]

3. It is a great idea, because it allows industry to optimize

If you have the choice between fixing up two plants, you can calculate which one will get the most bang for the buck.

Option A: cost 1M$ reduces CO2 X amount
Option B: cost 2M$ reduces CO2 3X amount

A good businessman will do option B first. This works a lot better than slapping down random fines, or doing what the law does now: "You have to use whatever technology is available to reduce pollution." What's "available" mean? Is shutting down the factory(and moving to Mexico) available? A market like this is generally a good idea if an industry can't get around polluting, but you slowly want to squeeze them into improving things.

There's this crazy guy in freeperland that totally believes in the stuff. He makes some good points, but is still a little out there. His basic idea is to sanction "process rights", so that everyone is allowed to keep doing what they're doing now. Environmentalists can then buy out the process rights, kind of like buying out farmers' water rights.

One really neat thing about markets like this is you can mix types of pollution. For example one industry can maybe produce a little bit more pollution in one area, in exchange for a lot less in another. Such a trade-off can be rewarded by the market. Government regulations and slapping down fines can't achieve something this complicated.

Market forces can work great to control pollution, but any market generates overhead and has to be legally protected too.