Is a Cap and Trade Carbon System the Right Approach?

Ever since the slow realization set in and we began to understand that our conspicuous consumption over the decades has led to serious damage to our environment, as a society we have been looking for ways to turn it around. Certainly, the problem is gigantic as we are very reliant on the use of fossil fuels for our energy. The subsequent emission of dangerous greenhouse gases has caused a considerable problem and must be addressed.

Few would disagree that greenhouse gas damage has been caused to our environment and many of us can already see the adverse climate problems that have been caused. However, it will need the action of governments to force change in such a way as to be effective. This change is coming however as a cap and trade carbon system has just been introduced by the British which will effectively force the largest consumers of energy to change their ways and reduce their output of carbon emissions.

The Carbon Reduction Commitment is legislation aimed squarely at the largest producers in the United Kingdom. This cap and trade carbon system will place a limit on the total amount of carbon emissions and force individual organizations to trade between themselves and with the government, effectively reducing the overall volume emitted.

The cap and trade carbon system is basically a hybrid of a concept that’s been around for a long time. In this case though, carbon itself is being developed into a commodity and this is a very new approach. It is felt that a natural reduction will be achieved by forcing the largest consumers to include carbon as a cost within their operations. There is a lot of interest in this British program as many other governments around the world are likely to adopt similar ideas.

The British government has decided that approximately 5,000 companies in the country are major producers of greenhouse gases due to their consumption of energy. Within a couple of years, each of these companies will be required to actively reduce their carbon footprint as part of the cap and trade carbon system. Those that do not, will find that they face an increasing cost as they purchase their carbon allowances and will also find that their underperformance will be communicated to society as a whole.

Regulators are hoping that programs such as the Carbon Reduction Commitment will reduce emissions by as much as 80% by the year 2050. It is recognized that the problem will take time to reverse, but it is hoped that by this time the most serious and potentially devastating effects can be avoided.

The cap and trade carbon system adopted by the British may well appear in the United States as well, as legislation being considered in mid to late 2009 seeks to adopt a similar program.

Without the intervention of government, it is unlikely that either individuals or corporations would take the scale of action required to address climate change. Thus, although the cap and trade carbon system has its detractors, it is likely to make significant headway.