Emissions trading ethics (original) (raw)

Carbon trading: unethical, unjust and ineffective?

2011

Cap-and-trade systems for greenhouse gas emissions are an important part of the climate change policies of the EU, Japan, New Zealand, among others, as well as China (soon) and Australia (potentially). However, concerns have been raised on a variety of ethical grounds about the use of markets to reduce emissions. For example, some people worry that emissions trading allows the wealthy to evade their responsibilities. Others are concerned that it puts a price on the natural environment.

The practicalities of emissions trading

2007

In the past year, climate change has moved from political controversy to political consensus; at least, in relation for price-based policies the need to limit emissions. Uncertainties remain but with both major parties proposing to develop an emissions trading regime, it is timely to highlight some important practical issues that will face them on that path.

Emissions Trading at Work

Environmentally-Aware Business Models and Technologies, 2011

After introducing the foundations of cap-and-trade markets, the authors of this chapter confirm that the market architecture of the EU ETS is working and that secondary market trading is functioning. But they also illustrate frictions in price discovery and variability in pricing relations. This leads to the conclusion that efficiency and integrity of the emissions markets are particularly susceptible to institutional uncertainty and supply and demand constraints. Against this background the authors set out recommendations for integrating auctioning into the existing market infrastructure and institutions. This way, large-scale auctioning could ensure a smooth and effective supply of the underlying emission allowances into the markets.

Cashing in on climate change: political theory and global emissions trading

Critical Review of International Social and Political Philosophy, 2011

Global climate change raises profound questions for social and political theorists. The human impacts of climate change are sufficiently broad, and generally adverse, to threaten the rights and freedoms of existing and future members of all countries. These impacts will also exacerbate inequalities between rich and poor countries despite the limited role of the latter in their origins. Responding to these impacts will require the implementation of environmental and social policies that are both environmentally effective and consistent with the equality and liberty of populations to which they are applied. This article considers whether global emissions trading, namely, the creation of a global market for tradable allowances conferring the right to emit a certain amount of greenhouse gas over a specified time period, is normatively defensible from a liberal egalitarian perspective. After a brief review of the theory and practice of emissions trading, a number of normative objections to the international trade in emissions allowances are analysed. These objections appeal to one, or a combination, of two claims. First, emissions trading schemes are likely to produce undesirable outcomes, such as environmental neglect, in the further future. I call these ‘instrumental objections’. Second, emissions trading schemes violate non‐consequential norms of justice and fairness. I call these ‘intrinsic objections’. It is argued that, when combined, instrumental and intrinsic objections indicate that instituting a global network of emissions trading schemes, as envisioned by a number of parties to the Kyoto Protocol and Copenhagen Accord, would be illegitimate in absence of significant procedural and consequential safeguards.

The high cost of cost efficiency: A critique of carbon trading

Carbon trading, as a market-based climate policy that allows polluters to comply with emissions reductions commitments with tradable pollution rights, is presented by its proponents as the most cost-efficient alternative for climate change mitigation, while critics counter that the cost-efficiency argument ignores the harms that result from commodifying carbon. This thesis contributes to this debate, which is fundamental for the future of environmental policies, by exposing the social costs of carbon trading and making the case against its inclusion in the climate policy-mix. The argument developed here draws from theoretical contributions on the social costs of private activities and on value conflicts, as well as critical perspectives on the neoliberalization of nature and the limits of the market. Emissions trading was firstly proposed as an alternative to efficiency-maximizing or pigouvian environmental taxation. Based on the property rights approach to social costs, emissions trading would allow regulators to escape the impossible task of calculating the optimal level of pollution and offer instead a cost-efficient way to achieve an exogenously determined level of pollution. This theoretical shift would allow economics to be centred on discussing the best means to achieve given ends and relived it of discussing ends. The ends-means dichotomy, however, does not hold outside textbook economics, as well as the description of emissions trading as a simple and efficient alternative to direct regulation. As the US experience with emissions trading shows, creating markets for tradable pollution rights requires government investment in a regulatory apparatus that is no less complex than what is required for direct regulation or taxation. This experience also illustrates how the purported efficiency of emissions trading systems is a flip side of their weak environmental performance and their disregard for social justice and democratic participation. Carbon trading schemes created under the Kyoto Protocol raise additional problems. Compared to “cap and trade” schemes based on a single pollutant and a restricted number of sources, schemes like the EU Emissions Trading System are more complex and require further government intervention. Furthermore, flexibility instruments like the Clean Development Mechanism allow industrialized countries to pollute beyond their emissions commitments and raise issues with the disputable integrity of methodologies that account for emissions reductions from offset projects relative to an arbitrary baseline. The dismal performance of these schemes is illustrated by their inability to provide an incentive to decarbonization, while distributing rents to polluters and creating new sources of corruption. These issues are not reducible to discussions on accounting procedures and other technicalities. Opening the “black box” of carbon quantification and commensuration reveals that its calculations sideline relevant uncertainties and assume a degree of accuracy that scientific knowledge and technology cannot deliver in the present. Yet, since accounting for emissions increases or reductions requires political decisions on what is to be accounted for, what is the relevant metric and what is an acceptable degree of uncertainty, further scientific and technological developments are not enough to make it possible to produce the unambiguous numbers that carbon trading requires. Going further on the discussion of the implications of carbon commensuration and abstraction, this thesis presents an argument against the inclusion of carbon trading in the climate policy-mix based on four normative critiques. With the support of critical literature, it is argued that carbon trading is ineffective, undemocratic, unjust and unethical and that, for these reasons, it can only be considered as a cost-effective policy when its social costs are ignored. An argument against carbon trading reformism is then presented by illustrating how trying to mitigate the negative effects of carbon markets by imposing restrictions on trading leads to the erosion of these markets. A better alternative is claimed to be supporting climate policies that foster a plurality of values and deliver social benefits. The thesis concludes by advocating a shift in the climate policy debate to a discussion on the values that are fostered or hindered by each policy. A general framework is proposed that respects value pluralism and acknowledges conflicts between incommensurable values, which is not compatible with market-based policies.

Towards Sustainable Carbon Markets: Requirements for Ecologically Effective, Economically Efficient, and Socially Just Emissions Trading Schemes

MAGKS Papers on Economics, 2011

Domestic climate policy emissions trading schemes appear to be spreading all over the word. However, carbon markets in existence often suffer from dilution in terms of ecological effectiveness, economic efficiency, and social justice. Thus, in order to firmly base carbon markets on the main pillars of Sustainable Development, this paper defines the criteria of ecological effectiveness, economic efficiency and social justice and operationalizes them for giving design recommendations for sustainable carbon markets. Methodologically, the paper uses welfare and institutional economics, jurisprudential reasoning, and modern climate justice thinking in order to discuss the three criteria. In addition, design and implication analysis is applied in order to develop design recommendations for sustainable carbon markets. By doing so, the paper provides evaluation criteria for emissions trading schemes in existence and in planning, but also allows for improvements in order to make emissions trading a valuable instrument of a sustainable global climate policy.

The Efficiency, Equity and Politics of Emissions Permit Trading

Economy & Environment

This paper illustrates that an international permit trading system may hurt relatively poor countries by making associated economic activities una¤ordable. A model is constructed in which the free market solution is Pareto ine¢cient as a result of pollution. The introduction of tradable permits allows pollution to be internalised, and brings about an increase in the total social surplus. But when incomes vary, this may not lead to a Pareto improvement; those in poor countries stop the polluting activity because they cannot a¤ord to do otherwise. Only those in relatively rich countries are made better o¤. This may explain why poor countries are reluctant to ratify the Kyoto Protocol, itself advocating a permit trading scheme. The politico-economic implications of permit trading are also examined. We show that the democratic requirements for rati…cation impose a lower bound on pollution reduction that can be achieved through a system of pollution permits with trade. 1 Funding from a MacArthur Foundation project examining proposals for a possible World Environmental Organisation is gratefully acknowledged. We would like to thank Ben Cartwright, Mamoru Kaneko, Laura Marsiliani, Cees Withagen, an anonymous referee, and participants at the EURESCO conference on International Dimensions of Environmental Policy, Kerkrade, Holland for helpful comments on an earlier draft.