August 8, 2008, Newsletter Issue #111: Emissions Trading

Tip of the Week

Emissions trading is a method that is being used to control the amount of pollution being released into the atmosphere by providing an economic incentive for reducing the amount of pollution being generated. Excessive greenhouse gasses, carbon dioxide in particular, which comes from pollution in the atmosphere is a major factor in global warming. To make a measure of the amount of greenhouse gasses being released, a carbon credit is set to be a certain amount, usually a ton, of emissions. A central authority is the one who sets the limits to the companies by assigning a certain amount of credits to each company. Each company, in turn, is responsible for maintaining their emissions under their credit limit. Those companies that are able to stay under their limits are given the opportunity to sell their excess credits for monetary gain. There is no restriction on whether the sales are being done privately or in the international markets. Likewise, companies that are going over their set limits may purchase those extra credits to increase their carbon credit limit. The goal for this is that hopefully, companies will continue to invest in technologies that reduce their release of pollution. Companies under their goal will want to stay under their goal to continue selling credits. Companies over their goal, on the other hand, will want to lessen or even remove their reliance on the purchase of credits, perhaps even to sell their own credits in the future. In the end, it is believed that the threat of global warming can be lessened with the institution of these changes.

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