| UK Cap and Trade - Let the Market Decide |
| Written by Daniel Stouffer | |
| Friday, 18 September 2009 | |
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Politicians in Great Britain are listening to economic experts who have long advocated that the use of market forces is the best way for us to wage war in the battle against global warming and climate change. The UK cap and trade scheme introduced recently is doing exactly that, by seeking to drive down domestic carbon emissions by putting a price on efficiency. Newly elected Pres. Obama is also known to support this viewpoint.
Politicians in Great Britain are listening to economic experts who have long advocated that the use of market forces is the best way for us to wage war in the battle against global warming and climate change. The UK cap and trade scheme introduced recently is doing exactly that, by seeking to drive down domestic carbon emissions by putting a price on efficiency. Newly elected Pres. Obama is also known to support this viewpoint. The UK cap and trade scheme is founded on the principle of setting an upper limit on the total amount of carbon emissions that are deemed to be "acceptable," throughout the country. The British government estimates that by introducing this program and fostering gradual improvement all the way up to 2050, an 80% overall reduction would be obtained. The British government, through the introduction of the UK cap and trade scheme, has effectively created a brand-new commodity -- carbon. By specifier an overall cap and forcing those organizations that emit carbon as part of their normal activity to buy "allowances" from the government, an element of economics scarcity is introduced. As a tonne of CO2 will retain an actual value under the UK cap and trade scheme, it follows that an enterprise will be incentivized to reduce its reliance on carbon by introducing efficiencies within its cycle. As it will rely less on carbon emissions, it may sell its unused allowances on the market, trading to other companies who may not be as efficient. In this way, market forces will eventually force a reduction in overall carbon emissions. Within industrialized society, it is likely that realistic reductions in carbon emissions will be difficult to achieve without mandatory programs. Indeed, the United States Congress is currently debating the implementation of a program similar to the UK cap and trade bill and whether this motion is passed or not, a similar product is very likely to appear. To enable the UK cap and trade scheme to work, the Carbon Reduction Commitment, as it is known, carries significant penalties for those who are unable or unwilling to comply. The largest emitters of CO2, as dictated by their recorded electricity usage, must comply and trade within the newly created markets. There is considerable pressure on those entities that must participate in the Carbon Reduction Commitment. Not only will they need to engage with market forces accordingly, they will be hit with additional fines should they find that they need to buy additional allocations. The government has said that they will publicize performance results to consumers, which could lead to negative reactions. Those companies that need to participate in the UK cap and trade program are actively involved in the process of registration and preparation. Although the project does not start until 2011, it was necessary for a company to look back to 2008 to determine whether it needed to take part or not. The Article Author: Daniel Stouffer has a lot of information about the UK cap and trade scheme and how a visit to www.verisae.com will be of use to you. |
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