Emission rights

The main objective with emission rights is obviously to reduce green house gas emissions. This is as we all now an important objective. Also the emissions right are traded as a financial instrument. Except for the fact that skillful traders can make money on this; it has another interesting implication.

The emissions right and their costs gives companies and states incentives to make reductions of emissions where they are most cost efficient, in simpler words the reduction are carried out where they are the cheapest. For example if you can invest in X tons of carbondioxide reduction in China, you will not buy an emission right that costs more.

Currently European companies are making significatn proporttions of their emission reductions in development countries. These kind of investment gives them a type of emission right that is an alternative to regular emission rights.

Currently, a new period of emission right is beginning. In the previous period there was an abundance of emissions rights, meaning the value of them and the incentives for decreasal of emissions was low. For this period the number of emission rights have decreased, forcing a decreasel of emission from companies in countries bound by the Kyoto agreement. However, to make this a powerful tool there are three major players that need to sign the agreement USA, China and India. When these three have joined, the real decrease will come. For USA it looks hopeful if a democrat regime is elected. China and India will probably not sign the agreement anytime soon, my opinion is that they will focus on growth and let the environment come second (or not at all).

[Emissions] [Environment] [Market Economy] [Kyoto Agreement]


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Ethanol

Ethanol is sometimes praised as the great fuel of the future, a biofuel which is significantly decreasing carbon dioxide emission. In most cases this is just not true and ethanol has some other setbacks.

The European Organisation for Economic Co-operation and Development warns that “the current push to expand the use of biofuels is creating unsustainable tensions that will disrupt markets without generating significant environmental benefits. The ethanol is generally produced from sugarcanes, wheat or corn. the ethanol produced contains less energy than an equal amount of gasolin. The general problem is that to produce the raw material for ethanol often large areas of forest are burned down creating large emissions. In the end the ethanol is often even giving more emissions than gasolin. Furthermore, cultivation for ethanol production is taking up large areas that would be needed to produce food. For example, filling up one SUV fuel tank one time with ethanol uses enough corn to feed one person for a year.

Another solution is distilling ethanol from cellulose, which will not compete with food production. However, this is depleting the soil where it is grown. Also the production of ethanol requires energy, which often comes from natural gas or oil.

Biofuels is the future, but there needs to be significant development before they can make any real changes. The use of ethanol is more important as a indication of willingness to change, than as a solution for reducing emissions.

[Environment] [Ethanol] [Biofuel] [Emissions]

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