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Wanna Argument?
Freak Weather - apocalypse now or storm in a teacup?
Interpreting Kyoto - The Reality of Negotiation.
Kyoto calls for cuts of over 5% on average, in greenhouse emissions from 1990 levels. To make these easier to achieve, the high polluting nations will be able to trade their emissions entitlements or give them away to private companies to trade. Many economists argue that the best way to implement a solution to an emission control problem is to use a market such as is being
suggested.
Such a solution was put forward in Southern California, USA in the early 1990s. Each of the 2700 largest polluters in S. California is assigned a quota for their damaging emissions. This quota is initially 8% less than their previous year's emission level. If a firm exactly meets its quota it faces no fine or penalty. But if it reduces its emissions by more than its quota, it can
sell the extra right to pollute on the open market.
If a company's quota is 50 tons of greenhouse gas emission per year and it manages to produce only 45 tons in the first year, then it can sell the right to emit 5 tons to another firm. The plan would work because each firm can compare the market price of an 'emission credit' with the cost of reducing its emissions and decide if it was more cost-effective to reduce its own
emissions or buy emission credits from other firms.
Alternatives to the so-called tradeable permits outlined above are to set up a regulatory system to try to reduce pollution, or to place a tax on the polluters, at a level equal to the marginal social cost of their production, thus reducing supply of the polluting commodity, as illustrated on the following diagram:
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