Thursday, April 15, 2010

Carbon Trading, The Kyoto Protocol, & Innovation

I've been following developments in the area of carbon taxes and carbon cap and trade for some time now. It's been an area I've found interesting since the early 1990s, when I thought I wanted to be an environmental law and economist. Last year, I was following the BC provincial elections and how the BC-NDP went after the BC-Liberals with an "axe-the-tax" attack on their carbon tax.

I'm currently working on a research proposal that addresses market development of carbon sequestration. The idea that if carbon can be sequestered, those doing the sequestering can trade that carbon with entities that are out of compliance. 

Here's a video explaining the mechanism::

This video critiques carbon trading on the grounds that it may not be effective if gross polluting industries such as electricity generation, steel, and petroleum have access to relatively cheap carbon credits.

This echoes my caveats about turning pollution into property rights, i.e., reducing natural capital to financial capital, and the politics of regulation. On the other hand, as I'm seeing in Canada, which is a Kyoto Protocol signatory, that the people want to address global warming and there's now a good chance that Canada will pass a law {Bill C-311} that will aggressively address carbon reduction and impose strict targets.

The advantage of carbon trading where the property "rights" to pollute are being reduced is that it spurs innovation into increasing efficiencies that reduce carbon externalities and methods of capturing carbons, in a context of increased scarcity. The key is creating a binding social carbon contract, that will serve as a basis for a carbon market which all stakeholders have faith in. This may be hard for Americans to grasp, given the US is not a Kyoto signatory, so the language and logic of climate change isn't "real" to many. The social dynamics of American capitalism aren't going to give many faith in the efficacy of a carbon market.

My interests are improving the measurements of sequestration in order to give more credence to carbon credits, utilizing existing infrastructures in sustainable agriculture to jumpstart adoption of carbon trading. Sound measurement will give stakeholders faith that the carbon credits are "real".  While this may be more science fiction than science right now, silicon nanowire technologies may be a way to cost-effectively gauge carbon sequestration through spectroscopy. I'll be blogging more on this, as the project develops.

Twitterversion:: Vids on carbon trading & political realities of cap+trade. Can carbon mkt development under Kyoto-rules spur innovation? @Prof_K

Song:: Hem-'The Beautiful Sea'

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