Carbon on sale

US organisations begin trade in carbon dioxide emissions

Published: Saturday 30 June 2001

although emissions trading between industrialised countries to meet reduction targets will officially begin only when the Kyoto Protocol comes into force, private companies in countries like the uk , Denmark, France and Norway are already engaging in such trading. The latest addition to this list is the us . As many as 25 organisations from energy, industrial, farm and forest sector have agreed to participate in the first us voluntary pilot programme to domestically trade in greenhouse gas ( ghg ) emissions.

The programme, called Chicago Climate Exchange ( ccx ), follows a feasibility study -- conducted by Richard Sandor, head of the Chicago-based Environmental Financial Products -- to test interest in an emissions trading market. Companies like Ford, DuPont, Calpine and conservation groups like The Nature Conservancy are some of the participants in the project. Trading in units of emissions reductions of carbon dioxide and other ghg s is expected to begin by early 2002.

Participating companies will reduce their ghg emissions by five per cent below 1999 levels in a phased manner over five years. By 2002, they will reduce by two per cent and by one per cent in each year from 2003-2005. The reduction target imposes a limit on the quantity of ghg s a company can emit, thus providing it with a tradable emission allowance. If a company emits below this limit, it will have a surplus allowance, which can then be sold to others, who may have overused their allowances.

Apart from trading in emission allowances, companies can buy emission reduction credits from projects that can offset ghg s, like renewable energy, energy efficiency projects, and projects to capture and use methane emitted by agricultural activities and landfills. Emission offsets by controversial carbon sequestration projects, like forest expansion and conservation, and soil management, will be also considered for credits. Uncertainties in measuring carbon dioxide absorbed by forests and the threat to biodiversity and indigenous population from plantations are some of the numerous concerns that make such projects controversial.

ccx aims to design and implement a private market based in the states of Illinois, Indiana, Iowa, Michigan, Minnesota, Ohio and Wisconsin. These states, representing a combination of transport, energy, manufacturing, agriculture and forestry sector, have a 20 per cent share in the us economy and ghg emissions.

The proponents of carbon trading believe that such markets can be useful in gaining experience and developing standard framework for monitoring emissions. It can also help in discovering the price of reducing ghg s. But opponents feel that the stress should be on undertaking real reductions by cutting fossil fuel use causing ghg emissions, rather than on purchasing the right to pollute by buying emission allowances.

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