Wednesday, June 4, 2008

Green Capitalism

Carbon trading is Green capitalism. Carbon trading, (also known as cap-and-trade and emissions trading) is an administrative approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants. Applying the basic principles of a free market, carbon trading employs a system of incentives and disincentives to reduce emissions. This system allows companies to sell their unused carbon quotas to companies that exceed their caps. Carbon trading helps to cut emissions, and assists corporations with the costs of pollution reduction. Carbon offsets also fund carbon-reduction projects.

However, the details of carbon trading, like the logistics of monitoring and enforcement, have not been adequately addressed. One of the most difficult issues is the initial allocation methods and cap. Despite these concerns, the cap-and-trade system is gaining in popularity in Europe and has been endorsed by both the Republican and Democratic Presidential candidates in the United States.

Competition motivates corporations and drives our economies and it is also helping average people to be more Green. In 2007, Carbonrally began a competition to reduce carbon emissions. Since then its 2,000 users have averted more than 150 tons of CO2 emissions. "We put the challenges in bite-size chunks, but that adds up," says founder Jason Karas.

Carbon trading helps to provide a concrete approach to measuring and managing CO2. "Global warming is an abstract idea that is hard for people to connect to," says Bob Schildgen, the Sierra Club's environmental-advice columnist. "It's good to start at the basic level, with real numbers." The carbon market is just the beginning of administrative systems designed to manage other pollutants. Markets for other pollutants already exist, although they tend to be smaller and more localized then the carbon market.

Global CO2 emissions total more than 28 billion tons a year, and carbon emissions are growing in the developing world. Clearly carbon trading is insufficient on its own to manage green house gases. The scale of the CO2 emissions problem demands global cooperation. Cap-and-trade systems employ free markets to set prices. And capitalism is the only global mechanism we have in place capable of penetrating the broader marketplace and achieving the kind of critical mass required to make a meaningful difference.

As individuals, corporations, and governments, we have an opportunity to set an example for the world. What we glean along the way will help us to make the most of these markets which in turn will enhance their value, effectiveness and appeal. Carbon trading may not be able to alter climate change by itself, but it is an important step on the road to a more sustainable future, and a powerful example of the ways in which Green is being woven into the fabric of our economies.

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