From poverty to power - Oxfam-Québec

FROM POVERTY TO POWERreduce the quantity of emissions, which is the critical factor in combatingglobal warming.Another approach that has gained great momentum combinesstandards and taxes to use price pressures to drive down carbon usevia a regional,national,or global market for carbon emissions reductions.Modelled on US efforts to reduce sulphur dioxide emissions under theClean Air Act, carbon trading allows companies to buy and sell‘carbon permits’ so that those who find it easiest to reduce emissionsdo so, and make a profit by selling the resulting carbon savings toother companies who find it harder to cut their carbon footprint.While individual governments have used all of the aboveapproaches to reducing emissions, carbon trading has been adoptedas a central tool for driving the global response, and it is evolvingquickly. In 2006, international carbon markets turned over around$30bn (1.6bn tonnes of carbon emissions, or CO 2e 228 ) and volumeswere expected to double in 2007. 229 The largest markets are theEuropean Union’s Emission Trading Scheme (EU ETS), which wasworth $24bn in 2006 (1bn tonnes of CO 2e) and the Kyoto Protocol’sClean Development Mechanism (CDM), worth $5bn (520m tonnes).The remaining carbon markets – incipient domestic markets inAustralia, Japan, Canada, and the USA – form a tiny fraction of totalvolumes. 230 Unlike the EU scheme or the CDM, these are not tied tothe Kyoto commitments. There is also a small but growing voluntarymarket in offsets ($100m/20m tonnes of CO 2ein 2006).The two main types of carbon trading that make up today’s marketsare emissions trading and offset trading. In the former, also known as‘cap and trade’, the government sets a ceiling (or cap) on emissionsfrom a particular economic sector and a schedule for lowering thatceiling over time. Companies in that sector are allocated a tradeablepermit (or allowance) for their emissions, and must pay a fine if theiremissions exceed that amount. Companies that find it cheaper toreduce their emissions can do so and sell their permits to other, dirtier,companies. The EU Emissions Trading Scheme is an early example ofthis kind of carbon market.Trading in carbon offsets involves reducing emissions from projectsoutside of an economy that has an established mandatory cap onemissions. For example, by funding an energy efficiency project in a414