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Can Carbon Trading be Effectively Implemented at the International Level to Reduce Greenhouse Gas Emissions?

By Julian Scott Yeomans.

Published by The International Journal of Environmental, Cultural, Economic and Social Sustainability

While the international community continues to debate the implementation complexities of the Kyoto Protocol, a number of countries have already announced plans to reduce their own greenhouse gas emissions. Furthermore, many other countries are still bound by the United Nations Framework Convention on Climate Change (UNFCC) to reduce their emissions levels even if they have not fully ratified the protocol. Consequently, the reduction of greenhouse gases has become a major international objective and, as the predominant greenhouse gas, carbon dioxide emissions have become the focus of any implemented restrictions. An assumption that some form of accord can be reached on the degree of emissions reductions does not imply that the specific regulatory mechanism necessary to attain these limitations has been determined. The Kyoto Protocol significantly advanced the carbon trading concept as the most effective means for reducing greenhouse gases.

Thus, even while the Kyoto process continues to struggle for definition and ratification, the genesis of a hypothetical carbon market has already commenced. At the same time, the ominous forecasts for the costs of removing carbon dioxide from the atmosphere are being unveiled. Not surprisingly, the same kinds of predictions of economic doom trumpeted prior to the launch of previous emissions reductions programs, such as the sulfur dioxide reduction program, have resurfaced when addressing the carbon reduction issues. Economists have used top-down models to make high cost predictions for carbon mitigation while disregarding the impact of emissions trading or the role of technology in their modelling scenarios. However, the industrialized world can proactively take very meaningful steps to bring down greenhouse gas emissions at a cost that is rather small, provided methods that help to drive down the compliance costs are used. The successful prospects for an effective and efficient market based solution will become even more important as governments around the world tighten restrictions on carbon emissions. An active, efficient trading of carbon permits could provide one inexpensive insurance policy alternative against the unknown costs and problems that may emerge because of the rapid increase in global carbon emissions.

At present, carbon trading schemes have only been effectively considered for implementation at the national level. However, international emissions trading has become a major flashpoint for disagreement over the implementation of the Kyoto protocol. It is not yet clear how a hypothetical world of international carbon trading would evolve, nor is it apparent how the roles of companies and countries could be successfully integrated within its broader framework. The development of an international market for carbon trading requires that effective emission reduction targets be set for each signatory country under an enforceable agreement. In this paper, the carbon trading approach will be contrasted with other emission reduction methods, essential features for successful carbon trading at the national level will be reviewed, the additional characteristics necessary for international implementation will be considered, and the potential for its success in the international arena will be speculated upon.

The International Journal of Environmental, Cultural, Economic and Social Sustainability, Volume 4, Issue 1, pp.1-10. Article: Print (Spiral Bound). Article: Electronic (PDF File; 571.426KB).

Dr. Julian Scott Yeomans

Professor, Operations Management & Information Systems Area, York University, Toronto, Ontario, Canada