“A Grand Experiment to Rein In Climate Change” — New York Times, 13 October 2012

In an effort to restrain any further progression of climate change, California will become the first state to make companies pay for the greenhouse gases they release. The program, called “cap and trade”, will begin on 1 January 2013.

The “cap and trade” program is a governmental system that places a restriction on the amount of emissions a company can produce, or a ‘cap’. The program also permits utilities, manufacturers, industries and companies to trade pollution permits, also called allowances, among themselves. Instead of using direct regulation, the premise of cap-and-trade is to control emissions through market forces – many view cap-and-trade as a tax.

California will set a ceiling and allocate amounts for companies individually. Some of the cap-and-trade allowances will be given to different companies across a spectrum of industries; what’s left will be auctioned. The goal is to slowly decrease the number of allotted allowances, which should compel decreased emissions.

Companies can purchase allowances at auction or on the carbon market. Companies can obtain offset credits by purchasing allowances from other companies that have reached their target emission-levels; or, from other companies that eliminate greenhouse gases and pollutants from the environment.

California’s goal is to reduce its emissions by almost 30% by 2020. However, the program poses great risks – namely, hurting an already-fragile state economy. Many fear that cap-and-trade will force an array of different companies – such as refineries, cement makers, glass factories – to leave the state. There is also a fear that companies will find a way around the program, which could hurt California’s chances of reaching its emission goal.

Currently, four methods of carbon reduction can obtain offset credits: timber management; coolant gas destruction; decrease in methane emissions through livestock waste; and city tree-planting projects. Offset projects are being developed in over 20 states and are preparing to join the new carbon market.

Because there is room for misuse in the cap-and-trade program, there is a great need for trained verifiers. This past summer, Los  Angeles held a test-preparation course that coached verifiers to become experts in the new system. These verifiers will be hired by companies to audit their emissions claims.

What are the pros and cons? Will a cap-and-trade program be affective enough to reduce pollutants and emissions, or will this program backfire and bring further damage to California’s delicate economy?

What actions, if any, will our reelected president take on the national stage? Will the Republican-controlled House let Obama take any action? Will he focus on economy, while takes a backseat again? Or will Hurricane Sandy make a bigger political impact, as it did on the just concluded US elections? There are many questions, and there doesn’t seem to be a clear path yet.

Conceived, Developed and Written by Dr. Subodh Das and Tara Mahadevan

November 7th, 2012

Phinix LLC

Copyright 2012. All rights Reserved by Phinix, LLC.

www.phinix.net    skdas@phinix.net

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