It's the Environment, Stupid.

Sunday, July 30, 2006

Carbon Trading 101

Jeff Goodell's piece in the NY Times sunday magazine, "Capital Pollution Solution?" is a good introduction to carbon trading markets. Goodell talks to Richard Sandor, chairman and CEO of the Chicago Climate Exchange, about the evolution of the (voluntary) U.S. carbon market, and its role in the future - from a business perspective.

Not without its flaws, the carbon market has some potential to be an effective way of reducing CO2 that standard command and control regulations don't. There's a certain flexibility and business incentive that makes cap and trade, market-based mechanisms more attractive to big polluters. But there is also the uncertainty of the market, and some net emission flaws that are evident drawbacks of this "solution". While this type of policy isn't for all pollutants (it's a very bad idea for things such as mercury that can accumulate in hot spots), in theory, it should and can be effective for CO2.

Goodell is also the author of the recent book, Big Coal: The Dirty Secret Behind America’s Energy Future, which I read a few weeks back. It is a GREAT book. Goodell looks into all aspects of the coal industry - who's running it (coal barons, railroads), who benefits and who suffers from it, and what is in store for the future of the industry, both in the U.S. and worldwide (China specifically.) He explores the history of the coal industry and debunks a few widely held myths - as in, there isn't as much accessible coal out there as we've been led to believe. Definitely worth a read for an in depth perspective on this otherwise hidden energy source.

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