Carbon trading

Let us take a hypothetical example.
Is there a better solution?
Does this suggestion meet the spirit of carbon trading?
Conclusion

Carbon Trading is, in my opinion, iniquitous.

Let us take a hypothetical example.

Imagine three identical carbon producers, 1, 2 and 3, let's say coal-fired power stations on the same grid, which emit n tonnes of CO₂ each. They have a target to reach 0.8. n tonnes. Nos. 1 & 2 invest heavily in plant and reduce emissions down to 0.75.n and 0.65.n respectively. No. 3 does nothing but buys 0.05.n from no. 1 and 0.15.n from no. 2. He continues to blithely produce n tonnes. So, altogether, the three producers generate 2.4.n, averaging 0.8.n for the three, so the target has been met - or has it?

No. 1's investment was such that it was able to reduce his CO₂ emissions by 25 percent and no. 2 by 35 percent. Who pays for this? Their consumers, of course. But, in a liberalised market, their electricity is too expensive, as a result, the investment being very heavy to achieve these results. No. 3 continues to produce cheap electricity, so it runs at full capacity, while nos. 1 and 2 can sell theirs' only when the offered price is high, at times when the demand is high. Therefore, the overall emissions are, in reality, higher than 0.8.n.

However, no. 3 pays nos. 1 and 2 for the carbon it emits. But the price of carbon in emissions trading is far too low to make a significant difference to the cost of no. 3's electricity and certainly does not cover the millions that nos. 1 and 2 have paid for their improved plant.

The problem does not stop there. When coal is burnt, carbon dioxide is not the only pollutant produced. Sulfur dioxide, a main cause of "acid rain" is another major pollutant. Then there are fly ash, heavy metal gases, including mercury and lead, and radioactive compounds etc. The equipment for reducing CO₂ emissions also reduces these other pollutants. So, nos. 1 and 2 contribute towards clean air in other respects, while no. 3 churns out all these other poisons, at full capacity, unhindered, because he has not needed to invest. These are probably worse for mankind than the potential climate change effects from the CO₂ emissions.

I'll grant you that this is an over-simplification of a complex situation, but you will no doubt get the gist of what I'm driving at.

Is there a better solution?

Probably, yes. First of all, scrap carbon trading which is heavily bureaucratic, anyway, and does not really serve any useful purpose except to give those unwilling or unable to invest a licence to pollute. It would be better to play on the price of electricity and to fine no.3 the difference in price between his selling price on a free market and that of his competitors, nos. 1 and 2. This would then level the playing field and the latter would become equally competitive. The proceeds of the fines would, in time, then allow no. 3 to invest in the equipment needed to reduce his CO₂ emissions. Notwithstanding, the average of nos. 1, 2 and 3 would still have to at least meet the 0.8.n tonnes CO₂ target; if they do better, so much to the good and benefit of mankind.

Does this suggestion meet the spirit of carbon trading?

Possibly not, at least entirely. But it better meets the best requirements of the world at large (pollution knows no frontiers!). The notion of carbon trading had, behind it, the possibility of electricity producers in developing countries being able to keep producing cheap electricity while more developed countries could afford to pay more. In other words, the developed countries would subsidise the less developed ones with cheap electricity, at the cost of themselves suffering the cost of the extra pollution. If the richer and poorer countries happen to share the same grid, such as between W. and E. Europe or between the industrialised and agricultural States of the USA or between different Asian nations, my idea would no longer open the money-tap for the heavier polluters who would be working on a competitive, free market. However, there is also a way to prevent consumers from paying excessive costs for their energy in the poorer countries in the short term. That is to allocate initially, say, 50 per cent of the fines to subsidies for consumed electricity through the distributors, reducing the percentage progressively over a number of years. This means it may take somewhat longer for no. 3 to convert his plant.

The big disadvantage of my idea is that there is a risk that it could become heavily bureaucratic unless measures were taken to keep it slim. This is best achieved by promulgating the rules in the simplest way - and to keep the management as far away from top-heavy organisations in Brussels, Washington or any other major Western city while taking all the necessary safeguards against corruption.

Conclusion

Carbon Trading is, in my opinion, iniquitous. There must be better ways of reducing CO₂ emissions from power plant.