Carbon Reduction Beyond Cap and Trade or the Carbon Tax

With all the commotion over the up coming November mid-term elections, the recent death of cap-and-trade has been quietly dismissed.The American Clean Energy and Security Act of 2009 (ACES), more commonly known as the Waxman-Markey Bill, was intended to set a price for carbon.  Since the threat of pricing carbon through legislation has disappeared, the current market for carbon offsets at the Chicago Climate Exchange has plummeted next to zero.  This begs the question, is passing carbon legislation hopeless?  What other alternatives to carbon legislation is out there?

Nevermind the question of whether such legislation is Constitutional or not.  Either way, there is no political will to push it through.  ACES worked its way with vigor through the House in 2009, only to be stalled in the Senate, passing away quietly.

The two alternatives for pushing carbon regulation is either cap and trade or a carbon tax.  Cap and trade would legislate restrictions on carbon emissions through permits.  It attempts to use market-esque methods, creating a market where emission permits and offsets can be traded.  The carbon tax, like its name implies, charges a tax to companies emitting carbon.

If proponents cannot even pass a market-esque bill through congress, what hope is there for passing a mandatory tax on something that has no price?

Perhaps looking into behavior and psychology may provide insight in how to approach this impasse. There are two types of incentives (motivations), either extrinsic or intrinsic.

Extrinsic incentives do not work because as soon as the reward or punishment is gone, motivation disappears.  In a word, extrinsic incentives are unsustainable.

Carbon legislation is extrinsic, as it sets an external reward (cap and trade) or punishment (carbon tax) for carbon reduction.   Case in point, the price and desirability for carbon offsets plummeted to zero with no threat of legislation.  All the motivation carbon reduction motivation has been external thus far.

Intrinsic incentives work far better.  People do something because they want to, not because they have to.  But the challenge is finding that magic that will inspire businesses to reduce their carbon impact willingly.  However, this is a far more sustainable method.

This is where the business case comes in.  The business case is all about the business at hand.  Rather than placing mandatory carbon restrictions on companies (the regulatory case), focus on what the business can do to make the business better (the business case.)  Link the business case to sustainability, and vice versa.

What are the intrinsic motivators of your business?  It could be quality, efficiency, customer service, loyalty, integrity etc.  The intrinsic are the intangibles.  Many times the intrinsic may be unquantifiable.  How can you link these intrinsic motivators to sustainability?  How can you link these to carbon management and reduction?

With carbon legislation effectively dead, we have to turn to the business case to make our impact on lower the carbon impact.  We cannot wait, and we need not wait for congress to develop extrinsic motivators to limit carbon.  We have the intrinsic motivators within us to inspire sustainable solutions to carbon impact.

Jonathan Mariano is an MBA candidate with the Presidio Graduate School in San Francisco, CA. His interests include the convergence between lean & green and pursuing free-market based sustainable solutions.

One response

  1. The only way to prevent global warming is to abolish the usage of the fuel coal that emits 6 billion metric tons of CO2 yearly , this is the major, major contributor to climate change Producers and users might dis-agree but the J P I Fuel Enterprise of the Philippines had developed an alternative fuel to replace coal with a neutral CO2 emission and with everlasting supply to energize all of the worlds industries that uses coal. It is made on waste organic materials when process form to an innovative firewood fuel of any size to suit plant needs. Carbon credit,carbon offset ,carbon tax, carbon trading. carbon price, carbon justice will never,never reduce greenhouse gas effect. Just abolish the fuel coal and thats the answer.

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