Research on ‘Emissions Trade’ By Sarah Jang Research on ‘Emissions Trade’ By Sarah Jang

ARIRANG NEWS- PRICE TAG ON CO2ARIRANG NEWS- PRICE TAG ON CO2 <<CLICK!:) ARIRANG NEWS- PRICE TAG ON CO2ARIRANG NEWS- PRICE TAG ON CO2 <<CLICK!:) QUOTE from the following video: “…Trading air pollutants such as carbon dioxide. It's part of an active policy of the Kyoto Protocol signed in 1997 and revamped in 2005, which puts a limit on carbon emissions in most developed nations. For countries implementing the emissions trading system, it's a way of providing incentives for countries and companies, trying to cut CO-2 output while penalizing those who don't. It's a system already active in European Union member states since it started two years ago and has grown six fold in the last year alone into a 60-billion US dollar market. It's something Korea is gearing up to be part of by 2013 when the government plans to force companies to add the cost of carbon emissions to the basic cost of their products. “

OVERVIEW  What is it?  Why needed? (Purpose & Benefits)  What nations are involved?  How is it?  PROS & CONS  In Korea…  What is it?  Why needed? (Purpose & Benefits)  What nations are involved?  How is it?  PROS & CONS  In Korea…

What is Emissions Trade? (1)  Emissions trading is an administrative approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants. It is sometimes called cap and trade.  A central authority (usually a government or international body) sets a limit or cap on the amount of a pollutant that can be emitted.  Emissions trading is an administrative approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants. It is sometimes called cap and trade.  A central authority (usually a government or international body) sets a limit or cap on the amount of a pollutant that can be emitted.

What is Emissions Trade? (2)  Companies or other groups are issued emission permits and are required to hold an equivalent number of allowances (or credits) which represent the right to emit a specific amount. The total amount of allowances and credits cannot exceed the cap, limiting total emissions to that level.

What is Emissions Trade? (3)  The cap is usually lowered over time - aiming towards a national emissions reduction target.  In other systems a portion of all traded credits must be retired, causing a net reduction in emissions each time a trade occurs. In many cap and trade systems, organizations which do not pollute may also participate, thus environmental groups can purchase and retire allowances or credits and hence drive up the price of the remainder according to the law of demand. Corporations can also prematurely retire allowances by donating them to a nonprofit entity and then be eligible for a tax deduction.  The cap is usually lowered over time - aiming towards a national emissions reduction target.  In other systems a portion of all traded credits must be retired, causing a net reduction in emissions each time a trade occurs. In many cap and trade systems, organizations which do not pollute may also participate, thus environmental groups can purchase and retire allowances or credits and hence drive up the price of the remainder according to the law of demand. Corporations can also prematurely retire allowances by donating them to a nonprofit entity and then be eligible for a tax deduction.

What is Emissions Trade? (4) The Emissions Trade is mostly active in EU nations and US.

What is Emissions Trade? (5)

What is Emissions Trade? (6)

Purpose  The overall goal of an emissions trading plan is reductions in the emissions of pollutants.  Emissions trading can significantly reduce the cost of improving air quality.  If Governments, or companies, want to reduce emissions, then providing an economic incentive improves compliance and benefits the environment.  Emissions trading lowers the cost to participants and gives business flexibility choose the form of compliance  The overall goal of an emissions trading plan is reductions in the emissions of pollutants.  Emissions trading can significantly reduce the cost of improving air quality.  If Governments, or companies, want to reduce emissions, then providing an economic incentive improves compliance and benefits the environment.  Emissions trading lowers the cost to participants and gives business flexibility choose the form of compliance

What nations are involved?  US  European Union  Australia  New Zealand  Japan  Russia  South Korea  (Emissions Trade is a program directed for developed nations that produce most of the world’s emissions & especially for the nations who signed Kyoto Protocol.)  US  European Union  Australia  New Zealand  Japan  Russia  South Korea  (Emissions Trade is a program directed for developed nations that produce most of the world’s emissions & especially for the nations who signed Kyoto Protocol.)

How is it?  There is early evidence that emissions trading works. For example, a highly successful emissions market was established in the United States in the 1990s to reduce acid rain causing emissions of SOx. This scheme gave power plant operators the flexibility to choose the most cost effective means to reduce emissions.  Over 400 power plants were able to comply with their emissions targets to cut acid rain at a far less cost than anticipated. Between 1995 and 1997, SOx emissions from these plants were reduced by 30% more than originally required under the Clean Air Act. This trading scheme will run until 2010, but this initial evidence indicates that trading is an effective tool in terms of cost savings and environmental benefit.  There is early evidence that emissions trading works. For example, a highly successful emissions market was established in the United States in the 1990s to reduce acid rain causing emissions of SOx. This scheme gave power plant operators the flexibility to choose the most cost effective means to reduce emissions.  Over 400 power plants were able to comply with their emissions targets to cut acid rain at a far less cost than anticipated. Between 1995 and 1997, SOx emissions from these plants were reduced by 30% more than originally required under the Clean Air Act. This trading scheme will run until 2010, but this initial evidence indicates that trading is an effective tool in terms of cost savings and environmental benefit.

Pros and Cons-- PRO (1)  Emissions trading can significantly reduce the cost of improving air quality.  If Governments, or companies, want to reduce emissions, then providing an economic incentive improves compliance and benefits the environment.  Emissions trading lowers the cost to participants and gives business flexibility choose the form of compliance.  Emissions trading can significantly reduce the cost of improving air quality.  If Governments, or companies, want to reduce emissions, then providing an economic incentive improves compliance and benefits the environment.  Emissions trading lowers the cost to participants and gives business flexibility choose the form of compliance.

Pros and Cons-- PRO (2)  Benefits both the buyer and the seller  The transfer of allowances is referred to as a trade. In effect, the buyer is paying a charge for polluting, while the seller is being rewarded for having reduced emissions by more than was needed. Thus, in theory, those that can easily reduce emissions most cheaply will do so, achieving the pollution reduction at the lowest possible cost to society  Emissions trading allows established emission goals to be met in a cost effective way, letting the market determine the lowest cost pollution control opportunities. Emissions trading can work within a region or country or on a global basis.  Benefits both the buyer and the seller  The transfer of allowances is referred to as a trade. In effect, the buyer is paying a charge for polluting, while the seller is being rewarded for having reduced emissions by more than was needed. Thus, in theory, those that can easily reduce emissions most cheaply will do so, achieving the pollution reduction at the lowest possible cost to society  Emissions trading allows established emission goals to be met in a cost effective way, letting the market determine the lowest cost pollution control opportunities. Emissions trading can work within a region or country or on a global basis.

Pros and Cons-- CON (1)  Trading may be a more complicated means of achieving the same objective  Permit prices may be unstable and therefore unpredictable  Some cap and trade systems pass the quota rent to business though grandfathering (a certain number of credits are given away for free rather than auctioned)  Cap and trade systems could become the basis for international trade in the quota rent resulting in very large transfers across frontiers  Trading may be a more complicated means of achieving the same objective  Permit prices may be unstable and therefore unpredictable  Some cap and trade systems pass the quota rent to business though grandfathering (a certain number of credits are given away for free rather than auctioned)  Cap and trade systems could become the basis for international trade in the quota rent resulting in very large transfers across frontiers

Pros and Cons-- CON (2)  Cap and trade systems are seen to generate more corruption than a tax system  The administration and legal costs of cap and trade systems are higher than with a tax  A cap and trade system is seen to be impractical at level of individual household emissions  Critics of emissions trading point to problems of complexity, monitoring, enforcement, and sometimes dispute the initial allocation methods and cap.  Cap and trade systems are seen to generate more corruption than a tax system  The administration and legal costs of cap and trade systems are higher than with a tax  A cap and trade system is seen to be impractical at level of individual household emissions  Critics of emissions trading point to problems of complexity, monitoring, enforcement, and sometimes dispute the initial allocation methods and cap.

In Korea  Emissions Trade( 탄소시장 ) entered in 2007  statistics and future plans on Korea's COz Emissions Trade statistics and future plans on Korea's COz Emissions Trade  Emissions Trade( 탄소시장 ) entered in 2007  statistics and future plans on Korea's COz Emissions Trade statistics and future plans on Korea's COz Emissions Trade YearAmount of necessary Carbon reduction (1,000,000 CO2 ton) Cost (in 1,000,000 $) Lowest Estimated MiddleHigest 1,634.24, ,149.61, ,598.3

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