November 27th, 2009
BusinessWeek ran a story last week on a simple loophole in the concept of cap & trade being debated in Congress at the moment.
Cap & Trade is supposed to work something like this… You run a business that creates pollution as part of its production process. We measure the pollution you create and we “cap” it so that you can’t increase the amount of pollution you produce. Then we create a market in carbon credits. You can reduce the pollution you create and sell your credits. Or you can buy credits from other businesses that have reduced their pollution output. Or you can buy credits from environmental conservation projects that are doing things like planting trees (which absorb pollution). And in that last step we find the glitch.
The BusinessWeek article points out that many of the conservation projects that would sell carbon offsets if Cap & Trade becomes law are project that will go ahead anyway – whether the law is enacted or not. The idea that a market in carbon credits will create new conservation projects is questionable.