HOW CAP AND TRADE IS SUPPOSED TO WORK

by Rick Maltese

There are several greenhouse gas emission reduction systems that have been tried or recommended in recent years. Among them are Cap and Trade, that has a trading of emission allowances which amount to penalties or fines that become a form of dubious bartering to avoid loss of profits. The payments go to the government to spend how they please. Auctions are held periodically to keep the offenders on top of maintaining their commitments.

Another type is the Carbon Fee and Dividend such as the approach being promoted by the Citizens Climate Lobby.  They essentially penalize the polluters by charging a fee for creating greenhouse gases and giving the proceeds in the form of dividends to those who suffer the consequences, those who breathe the air, the common citizen. This scheme by-passes government control of where the money gets spent and has the full support of James Hansen, the climate scientist who first warned the world about climate change.

Cap and Trade is supposed to be a way of penalizing the polluters so they are forced to make choices that reduce emissions. The “Cap” is a maximum measure of how much of any greenhouse gases a company is allowed to emit. The standards aim at the worst offenders and ignore to a large degree the less obvious offenders such as wind, solar and bio-fuels. Wind and solar would be clean energy if they were capable of running reliably and full-time but this is not the case. Their very existence is dependent on getting backup power from natural gas.

In the case of wind, that’s 70 percent of the time and for solar between 80 and 90 percent of the time. This is not a popular view and the general public as well as politicians need to be educated about it.  Biofuels such as wood and ethanol still release plenty of CO2. And whatever is so “natural” about natural gas, it still contributes carbon emissions. Seventy-five percent of households in Ontario use natural gas for heating. That means homeowners will be paying extra for heating. Greenhouse gas emissions by  electricity generation are small compared to emissions by Industry and Transportation.

One surprise about implementing this emissions reduction strategy is that some major polluters are exempt for four years because they provide a lot of jobs and also made efforts to reduce their emissions in recent years.

…Cap and Trade in Ontario will be joining forces with other Cap and Trade jurisdictions as part of a global effort…

When Cap and Trade went into effect January 1st, 2017 in Ontario the energy sector had already successfully reduced its emissions by eliminating coal plants, with the final coal power plant closure in 2014. But that was not the end of coal usage in Ontario. We ended electricity production from coal but there are still coal users such as the steel industry and cement production companies. But unlike electricity where clean non-emitting power sources can replace coal, this is not so in many industries. Steel and cement need coke which is a bi-product of a special way of burning coal.

Cap and Trade in Ontario will be joining forces with other Cap and Trade jurisdictions as part of a global effort. That includes Quebec and California. What sets Cap and trade schemes apart are the rates being charged and what greenhouse gases are included. When alliances are made, there is a need to create their Cap and Trade programs based on similar policies.

Cap and Trade allowance permits if set too high can start a recession. Cap and Trade exists in different forms all  over the world – in Europe, China, California, Brazil, Quebec and Ontario to name just some. Some countries and regions only deal with CO2 while Ontario deals with seven greenhouse gases including carbon dioxide (CO2 ), methane (CH4 ), nitrous oxide (N2 O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulphur hexafluoride (SF6 ) and nitrogen trifluoride (NF3 ).

The critics of Cap and Trade schemes say that it is usually ineffective at preventing emissions of greenhouse gases because of two main drawbacks. One, governments want to bring in revenue to balance their budgets. Incentives and motivation get confused and prevent effective regulation from happening. Also the schemes tend to be complex for a number of reasons.

Three initiatives that will begin, partly paid for from the raised revenue from Cap and Trade, are

  • Green Bank – The Green Bank initiative will provide financing for businesses and homeowners to upgrade their dwellings to minimize greenhouse emissions.
  • Low-carbon transportation – The biggest polluting sector of all needs more reduction. Using more public transit and more electric vehicles will take years but are an important step. Regional Express Rail (RER) will electrify the Go Rail. Also avoiding urban sprawl would be addressed.
  • Clean tech. – Water, waste water and agriculture must begin improving methods for water purification and industrial processes so they reduce their carbon footprint and increase their efficiency.

 

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