Emissions Trading

This is an approach that is market based which is aimed at controlling pollution of the environment through incentives for entities that have achieved a reduction in their emissions. What happens is that a body which has authority sets the level of a particular pollutant that an n organization is allowed to emit. This limit once it is set, it is then sold to organizations as a permit allowing a given organization to release a given amount of pollutants of a specified pollutant. Firms are supposed to have a particular quantity of permits depending on their emissions. The number of permits has to be either below the specified limit or equal to but cannot exceed the limit. For those firms that may require more than what they have they can only buy them from those organizations or firms that require fewer permits.

This reassigning of the permits is what is termed as trade. In this trade, the buyer is required to pay more for polluting more. In return, the seller is getting reward for polluting less. In this, those who are able to reduce emission do so at low cost. Several programs trade pollutants of different kinds. The largest program that deals with green house gases is a Scheme. This program helps in combating climate change. This approach has benefits and drawbacks. One thing is that such a mechanism is likely to succeed as it is a consensus between all the stakeholders. This mechanism is made with verification in mind and due to this people develop confidence in the system and so they can easily provide support for such a mechanism which becomes easier and cheaper to manage. Application of such a mechanism brings closer and combines expert information that what the regulator could have. The uniformity provided by this mechanism makes good and services be more accessible to people (Legge & Egenhofer, 2002). There is also a likelihood of an increase in compliance. This can only be possible if the market and the regulators agree to participate fully and comply.

Critics of this kind of mechanisms argue that the incentive can be short term and so there is a possibility of over polluting. This is in the sense that, permits are issued depending on earlier emission levels. Therefore firms that had cut down their emissions may raise their discharge levels so that they can get a higher permit allocation in the following allocation.

By : Noor Alzayer