The following appeared April 25, 2005 at CNN.com:
HOT AIR IS NOW FOR SALE
Greenhouse gas market to slow global warming
BY ALISON GRAAB
Greenhouse gases are being bought and sold on
the open market by countries concerned about
climate change. The Kyoto Protocol, an international treaty to curb global warming, created the
market in greenhouse gases to reduce emissions
of methane, carbon dioxide and other gasses
heating up the planet. The trade has gained
steam since the Kyoto treaty entered into effect
this February.
Greenhouse gases -- prime culprits in global
warming -- trap heat in the Earth's atmosphere.
Since the middle of the 19th century, human agriculture and industrialization have poured a
huge amount of them into the atmosphere,
where they have captured enough heat to initiate climate change -- about 0.6 degrees Celsius
during the past century, according to the United
Nations. More warming is expected, but the exact amount is highly contentious.
The Kyoto Protocol, with more than 140 nations
on board, aims to use market forces to rein in
emissions by creating a market in greenhouse
gasses. Under the pact, participating countries
may emit a specific quantity of the gasses, and
can sell off excess "credits" for profit.
That's attracting a lot of business, brokers say.
"I think that even conservatively we have the
market doubling from 78 million to 150 million
tons [of greenhouse gases] between 2003 and
2004," said Richard Rosenzweig, managing director at Natsource, a New York brokerage firm.
The World Bank estimates that funds offering
mitigation investments are worth about $1.5 billion, according to The Wall Street Journal. Inves-
tors are funding projects that reduce greenhouse
gas emissions, like hydroelectric dams and renewable energy plants, and earning investors
credits to offset emissions from factories and
power plants. The biggest buyers -- Japanese
companies and the Dutch government -- are
snapping up credits offered in regions such as
Asia and Latin America.
The United States proposed the market plan for
the Kyoto Protocol when it first signed the treaty
in 1998. It withdrew in 2001 arguing that the
treaty failed to appreciably slow global warming
or include developing nations. Despite initial resistance, it has been embraced by Europe and
Japan as an affordable way to slow climate
change.
The world currently emits about 28 billion tons
of carbon dioxide or its equivalent in other
greenhouse gases, known as GHG, each year,
according to the United Nations. Under the Kyoto Protocol, industrialized countries must cut
emissions by 5.2 percent from 1990 levels between 2008 and 2012. The United States is responsible for 7 billion metric tons, about 25 percent of the world's greenhouse gases, but is not
party to the Kyoto Protocol's restrictions.
Although trading volumes have doubled annually in recent years, Rosenzweig said, a global
bazaar in GHG is still a long way off. The major
markets are isolated to Canada, Japan and the
European Union, accounting for about 3 billion
tons of emissions reductions under Kyoto.
"What is really happening is every nation is going off and doing what they would have done
anyway under the umbrella of Kyoto, but oper-
ating unilaterally," said David Victor, director of
the Energy and Sustainable Development program at Stanford University.
set up in the 1990s. The Acid Rain Program had
cut sulfur dioxide emissions by 38 percent in
2003 and was the inspiration behind Kyoto's
trading approach.
Still, these domestic markets could leave a significant mark on the international economy. According to Ilex Energy Consulting of Oxford,
England, meeting greenhouse gas reductions is
expected to cost European industry several billion dollars during the next three years, through
updating technology or buying emissions credits.
However, some countries, such as Australia and
the United States, say the costs of implementing
the treaty and reducing carbon dioxide create a
dangerous drag on their economies without
substantially reducing global warming. The
United States withdrew from the treaty in 2001,
citing concerns over domestic economic growth
and exemptions for rapidly developing countries like China and India.
The Kyoto Protocol also gave a wake-up call for
companies unfettered by emission limits. Major
companies are drawing up contingency plans
for future regulations on carbon dioxide.
The United States has one of the highest per capita rates of emissions of GHGs, at about 6.6 tons
per person, according to the Environmental Protection Agency data from 1995. It also generates
about a quarter of the world's economic activity.
The Investor Network on Climate Risk, a shareholders organization, recently sent petitions to
twenty-five corporations in the oil, automobile
and energy industries, asking them to disclose
global warming risks, according to The Nation
magazine. Instead of silence, several companies,
some of which once publicly lobbied against
predictions of global warming, acknowledged
the threat posed by climate change and made
plans to deal with possible future regulations.
American Electric Power, a coal power utility,
said U.S. controls on carbon dioxide would likely arrive within the decade, and it was already
investing in emissions reductions.
Harnessing the market
Advocates of the Kyoto Protocol argue that
market-based approaches are required to tamp
down rising greenhouse gas emissions because
every sector of the economy, from agriculture to
aerospace, contributes to the problem.
Elliot Diringer, international strategies director
with the Pew Center on Global Climate Change,
said economic incentives -- backed up by government rules -- are indispensable.
"Whatever we do has to be done through the
marketplace," Diringer said. "Only the market
can mobilize the resources and expertise to get
the job done, but the market needs direction
from the government ... The government lays
out the goal, and the market figures out the best
ways to get there."
One of the most successful examples of marketdriven pollution reduction is the U.S. trading
program for nitrous oxides and sulfur dioxide
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