Emissions Trading System (ETS), an adaptation of the Kyoto Treaty in 2005, is commonly known as ‘Carbon Trading’. It is the trade of emissions under the cap-and-trade scheme devised to reduce greenhouse gas emissions (GHG). It aims at holding industries accountable for their contributions towards climate change without affecting their business operations. How? Well, a GHG “cap” or limit is assigned to companies as an emission allowance. Where a company falls below the limit, their excess allowances can be traded as credits with expanding companies or companies exceeding the limit, providing them with an opportunity to avoid being subjected to fines. However, is the industry really using carbon trading to achieve progress against climate change, or is the industry taking advantage of this policy to generate more revenue at the environment’s expense? Are we progressing or pretending?
Here Today, Here Tomorrow…
Ignorance is bliss but if bliss means living in a world devoid of any resources, unbearable hot summers, freezing winters and wearing gas masks to breathe – please count me out! If we can’t live in such conditions, then why subject the future generations to these.
To dust off this ignorance …
Carbon trading is at the heart of sustainability. Sustainable development focuses on employing all resources to enhance both current and future potential to meet human needs. Thus, the depicted scenario can be approached with the ‘universality principle’ of Kant’s theory1 to justify that the ETS is indeed an ethical approach that can bridge the gap between reserving the environment for the future and not impeding engineering and scientific advancements nor economic growth. It is important to consider that sustainable technological inventions require huge investments for their research and implementation strategies, and that isn’t always attainable.
Nonetheless, carbon trading offers a cost effective solution for industries globally and provides a smooth transition away from the current system towards an ideal world of zero-emissions. From the Kantian approach this is justified to be ‘morally right’ and should not be seen as a ‘mere’ means for economic gain, but as a good means to a bright end! Since the deployment of ETS, there has been a compliance rate of 99% as well as 2.9% reduction in GHG emissions compared to 2015. Also, collectively looking at the 28 EU member countries, the ETS has contributed to a 1.9% growth rate in GDP which depicts that the scheme is working.
Emissions Reduced, Funds Secured
We really shouldn’t fool ourselves, everyone is a beneficiary in this system. Essentially, profiting off GHG producers who do not utilise alternative energy sources and/or technological solutions to lower their emissions should not be viewed as entirely neoliberal and corrupt. Various implemented governing regulations such as the Market Abuse Regulation (MAR) and Financial Marketing Directive (MiFID2) with the Anti-money Laundering Directive have been adapted to cover the carbon market since 2014. These regulations ensure a transparent and liquid carbon market and regulate the trade, fines, and overall cash flow of the market.
Consequently, the innovation funds made from the carbon credit sales are used to encourage smaller co-operations, in the form of grants, to keep investing in more sustainable technology. These grants could be applied to projects ranging from process efficiencies to generations of ‘carbon sinks’. Furthermore, some of the so-called ‘victim’ companies, e.g. large corporate organisations, which are coerced to buy extra allowances to comply can also be beneficiaries. This is considering that in the long-run they are able to save over-head cost from inefficient processes. With the majority potentially gaining from ETS, it is ethically justifiable by the ‘pluralistic consequentialism’ theory in conjunction with the utilitarian approach to prioritize the consequence of preserving the earth over the mere economic gain of industries, for the greater good.
It’s our mess to clean up!
CO2 + $$$ = Warmer Planet
“Freak storms, melting glaciers, extremely hot summers, misplaced polar bears – the mascots of climate change”.
The conversation of climate change has become more rampant in various sectors and is now a hot topic by institutions, because it is spoken in a more widely accepted language than English – Money. Monetary value is now seen as the best way to achieve environmental protection which has in turn led to the formation of alliances between large corporate organisations and environmental NGO’s. As these alliances are dominated by economics and business, environmentalists are then made to stop fighting these powers and cooperate with them. Thus, schemes are then set up in order to make both environmentalist and large corporations complacent. As these schemes are set up by conventional economists from large organisations, they are believed to be the ‘Holy Grail’ and thus must be followed, but this is far from the truth. These schemes allow massive capital to be handed over to polluters with the greatest pull in a given sector, which then leads to an increase in the scale of their operations. These stakeholders are acting upon the ethical theory of ‘egoism‘, which justifies the need to operate according to what benefits the sole individual, in the hope that it will suffice for all. However, this is a truly selfish approach, as it does not agree with the utilitarian point of view which implores that we should maximize good for all or majority, not just the ‘big players’.
Additionally, carbon trading hosts a great interdependence between science and business, which generates clashing conflicts between the ethical values of both fields. Consequently, this directs the discussion to ethical relativism where pragmatism is a chosen ruling ethical value in the business world that supports their operations. These business corporations adopt carbon trading to mainly maintain their profit profiles, whilst pretending that they are responding to the global external pressure regarding climate change solutions.
A for Effort, F for Execution!
If I have a bruise on my arm and I put an ice pack on my leg, does that solve my problem? No. So why do the same with GHG emissions?
As of 2016, transport and fuel combustion systems cumulatively contribute about 78% of the EU’s total GHG emissions. Thus, the paramount way of solving the imminent issue of GHG emissions is to significantly deviate from a fossil fuel dependent economy. In order to achieve this, there has to be a fundamental change in our transport and energy systems. With the current way the ETS is set up, having a ‘cap’ for emissions is now seen as a ‘ceiling’ rather than a ‘floor’. Most corporations do not strive to achieve more and take initiatives towards addressing the root causes of their undue emissions; since they are either content with simply adhering to the cap or buying credits. The likes of Michael Sandel argue that pollution should not be a right that could be bought as it “may undermine the sense of shared responsibility that increased global cooperation requires”. Their beliefs are supported by the theory of deontology1, where an action is deemed ethical depending on whether it is right or wrong rather than its consequence. Despite the ETS having an apparent contribution in the net reduction of GHG emissions, it is viewed by many as a way of avoiding investments in tangible solutions to reduce GHG emissions through buying credits.
We should not be able to buy the right to pollute!
The theory of postmodernism regards the “idea of objectivity as a dubious invention of the modern era”, with that said we personally believe that carbon trading may be used by some as a means of pretence, but it is a progressive system that is continuously adapting to work for all.