What is Carbon Cap and Trade?
Carbon cap and trade programs are a market based solution to excessive carbon emissions where emitters (often companies) are given a certain amount of “credits” that permit the emission of 1 ton of carbon. The “trade” is that if a company reduces its carbon footprint below its given credits, its excess credits can be sold or traded to other companies who wish to emit more. The “cap” is that governments can set a maximum limit of carbon credits that corporations can emit, no matter who they go to (Kenton 2023). This creates a carbon market of credits where, if allowances of carbon emissions are in short supply, prices to trade them may go up, and companies that are willing and able to pay, will continually be allowed to emit more.
What happens if a company goes over their “cap”?
If a company surpasses their set carbon limit, they may be taxed (Kenton 2023). However, the US does not currently have a national carbon tax. Additionally, the US does not require any companies to participate in carbon cap and trade programs, it’s a voluntary market program (CarbonCredits.com 2022).
What is the difference between carbon offsets and carbon credits?
Pros of Carbon Markets
Keeping carbon stored out of the atmosphere, in soils, trees and the ground, is important to mitigate climate change. Carbon markets, when accurate and compulsory, could be an effective way to reduce deforestation. However, often the forests that are being protected with carbon markets would not be the ones being developed anyway. When cutting forests for farmland, lumber, and other markets remains more lucrative than protecting a forest for the sake of its ecological value and carbon storage capabilities, carbon markets will not be effective. If large corporations were required to pay for large forest protections, perhaps a carbon market would do some good.
Cons of Carbon Markets
One fundamental issue with a carbon market is the assumption that there is a linear relationship between carbon emissions and global temperature rise. Not all carbon emissions are equally detrimental to climate change and not all reductions are equally beneficial (Sovacool 2011). The idea of tipping points explains why the relationship between carbon emissions and temperature rise, as well as the negative effects that come with them, is not linear. Tipping points, or thresholds, are states of equilibrium that, when passed, shift the planet’s natural state of equilibrium into a new and often disastrous one. This may mean shifting from a negative feedback loop, where two phenomena cancel each other out, to a positive one, when they compound each other. For example, as the dark ocean is revealed as sea ice melts, the albedo (reflectiveness) of the Earth’s surface is decreased, resulting in more heat trapping capacity. Because of this, temperatures will rise faster, melting more ice, revealing more ocean, and causing temperatures to rise faster still. Carbon credits do not account for tipping points and positive feedback loops, so even if they were an effective market mechanism, they may not mitigate climate disaster as much as those using them say we will.
https://www.globalweatherclimatecenter.com/arctic-and-antarctic-weather-climate-topics/arctic-feedback-loops-credit-national-academy-of-science
In addition to the lack of effectiveness of even an ideal carbon market, large corporations paying for people to sequester carbon for their emissions can create issues. The carbon market is based on the intrinsically skewed ideology that it is permissible to commit wrongdoings, provided you can pay someone else to deal with the damages. We should be trying to stop carbon from the source of emission; our main goal cannot be to bring it down from the sky once it has been emitted.
Capitalist exploitation of nature under the guise of “carbon neutral” or “market solutions” will not and cannot solve the climate crisis. While a necessary part of climate mitigation, carbon sequestration cannot run as another market under the invisible hand of capitalism. The “invisible hand” will externalize the issues of carbon emissions to those in the Global South, allowing large corporations to continue drilling for fossil fuels, instead of forcing them to leave it in the ground. “Offsetting” emissions by large corporations perpetuates the idea that carbon emissions are inevitable, while we should be pushing for a complete transition to renewable and sustainable energy. Additionally, companies claiming to be carbon neutral allow consumers and policy makers to become complacent about the precarious situation we find ourselves in, allowing massive amounts of carbon to be continually emitted every year.
Works Cited
Credits, Carbon. 2022. “The Ultimate Guide to Understanding Carbon Credits.” Carbon Credits. January 26. https://carboncredits.com/the-ultimate-guide-to-understanding-carbon-credits/.
Kenton, Will. 2023. “Cap and Trade Basics: What It Is, How It Works, Pros & Cons.” Investopedia. Accessed May 4. https://www.investopedia.com/terms/c/cap-and-trade.asp.
Sovacool, Benjamin K. “Four Problems with Global Carbon Markets: A Critical Review.” Energy & Environment 22, no. 6 (2011): 681–94. http://www.jstor.org/stable/43735038.