Cap & Trade for CO2: Great Solution or Not?

Annie Leonard’s Story of Cap & Trade, which we wrote about a while back, throws a critical and generally dismissive eye on the concept of a cap & trade solution for carbon emissions. The film argues that such a solution is at best a distraction from real cuts in fossil fuel use, and at worst a crony-capitalist scam that ends up rewarding the worst polluters and doing little to change the fossil fuel basis of our economy.

However, many commenters on that post, including myself, found the film to be a disappointment which “threw the baby out with the bathwater.” Cap & trade, as currently written, is not flawless, but most of the film’s critiques were about enforcement and the distribution of CO2 credits, not about faulting the basic principal of trading credits. Worldchanging even outlined a full catalog of errors in the film.

While in Business School at Presidio, I came to be generally in favor cap & trade as an ideal way to work inside the existing economic system – rewarding well-performing companies according to the invisible hand of the market and imposing higher costs on those who fail to curb pollution. Of course, many catches remain: Who gets to set the bar? How are initial credits distributed? Who sets the plan for lowering the bar? And so on… dare I mention the complexity of dealing with many countries and their myriad laws and levels of economic development?

Needless to say, in the wake of Copenhagen, I thought a little more depth was needed. Got an hour? Great. Have a listen to Renewable Energy World’s excellent 60 minute podcast about “The Real Story of Cap and Trade.” Don’t have an hour? Why not bookmark this page and come back a little later. The podcast is a rock solid explanation of the cap & trade system from a variety of sources. I’d love to hear your thoughts…

For those with short attention spans, the podcast features points of views from the following folks, and yes, is generally in favor of the Cap & Trade concept:

Seth Kaplan, vice president for climate advocacy at the Conservation Law Foundation, describes the history of cap and trade as it rapidly evolved from an academic proposal to an international policy for limiting greenhouse gas emissions.

Phil Adams, president and chief operating officer of World Energy Solutions, talks about the differences between the primary and secondary carbon trading markets. He’ll also talk about how his company’s carbon exchange, the World Green Exchange, works as a driver for those markets.

Tim Healy, CEO and chairman of EnerNOC, tells us how he’s built a business around using less energy, not more. He’ll also talk about the company’s new CarbonTrak software and how it can help businesses realize the financial value in reducing emissions.

Milo Sjardin, head of U.S. carbon markets for New Energy Finance, compares the size and scope of the EU and U.S. carbon trading programs.

Erin Craig, CEO of TerraPass, describes the make-up of the “pure” voluntary market in the U.S. and how it may blend together with a compliance market in the future.

Michelle Chan, senior policy analyst with Friends of the Earth, warns about the potential downside risk in creating new derivative markets based on carbon. She talks about how investors could be creating “subprime carbon,” as they devise new financial products based upon bad offset projects.

And Peter Fusaro, chairman and founder of Global Change Associates, talks about how carbon markets will be regulated in the U.S. He’ll also discuss how Americans can learn from the European experience with cap and trade.

What do you think?

Nick Aster is a new media architect and the founder of TriplePundit.com

TriplePundit.com has since grown to become one of the web's leading sources of news and ideas on how business can be used to make the world a better place.

Prior to TriplePundit Nick worked for Mother Jones magazine, successfully re-launching the magazine's online presence. He worked for TreeHugger.com, managing the technical side of the publication for 3 years and has also been an active consultant for individuals and companies entering the world of micro-publishing. He earned his stripes working for Gawker Media and Moreover Technologies in the early days of blogging.

Nick holds an MBA in sustainable management from the Presidio School of Management and graduated with a BA in History from Washington University in St. Louis.