The evidence of how well tradeable pollution rights have worked in practice is mixed. Whilst proponents claim that a given environmental standard has been met for much less cost, opponents argue that the environment has benefitted little from such schemes. For example in Los Angeles there are two schemes to improve air quality. One is the Regional Clean Air Incentives Market, RECLAIM, which enables the trading of smog causing nitrogen oxides and sulphur oxides. An internal audit by the South Coast Air Quality Management District found no significant emissions reductions between 1993 and 1997 when the audit was done. James Jenal from Citizens for a Better Environment claims this happened because companies were able to inflate the baseline of allowable emissions, enabling an additonal 40,000 tons of air pollution which would not have been allowed under the previous regulatory regime (TRAC 1998). The second scheme introduced in Los Angeles, was a trading scheme enabling companies to offset their emissions by scrapping cars, that is, removing older more polluting cars from the roads. Some twenty thousand cars were scrapped in this way, but critics argue that these cars were often barely running and would not have continued to be used much longer anyway (TRAC 1998). The introduction of emissions trading as a mechanism for achieving the Kyoto Protocol has the potential to enable similar "phony" reductions. The most obvious is the trading of emissions credits with Russia and other eastern European countries that are in economic decline. Russia’s economic decline has meant that its carbon dioxide emissions have decreased by some 30% below 1990 levels. Now countries such as the US and Japan are looking to buy the right to those emissions which Russia is unable to use so that they don’t have to reduce their own emissions. This will not benefit the environment or help to reduce the global emissions of greenhouse gases in the long-term. They are referred to as "hot air" or or "phantom" emissions reductions (Gupte 1998; Belliveau 1998). The problem of inflated base-lines is also an issue for emissions trading in greenhouse gases. If a trading scheme is based on an initial free allowance based on past emissions, it is in the interests of polluting companies to put out as much greenhouse gases as possible in the next few years prior to such a trading scheme being introduced. What is more, such a scheme rewards the worst polluters by giving them the highest entitlements to start with. This applies both to individual companies and to nations as well. Anil Agarwal and Sunita Narain, claimed in the publication Down to Earth that Australia was being rewarded for its poor record on deforestation. They argued that a significant proportion of the country’s emissions have been from deforestation. "Emissions which are still present in the atmosphere and are causing global warming. But instead of being penalised for creating the problem in the first place, Australia has been able to use its high emissions to its advantage by winning the right to count any improvement from this position as its national credit."(Agarwal & Narain 1998) It is often argued by economists that markets are more efficient than centralised government decision making because they automatically gather information and ensure that supply and demand are balanced and resources allocated efficiently. However, this sort of argument cannot be applied to artificially contrived markets such as those created for pollution rights since the need for monitoring and enforcement remains–the regulator still needs to know what volumes and concentrations of wastes are being discharged, and needs to ensure that the firm is paying the correct amount or deserves emission credits, even when that firm is being charged for its wastes. "Any system of environmental control needs inspectors to check whether claimed emissions, discharges or resource extractions are correct: they are not less ‘bureaucratic’ because they are tax inspectors rather than regulatory ones" (Jacobs 1993: 7). Emission reduction credit trades now frequently involve a broker. Brokers’ fees are typically calculated as a percentage of the value of the transaction. Add to this the costs of accomplishing the air quality modelling that is frequently required for trades involving noncontiguous sources of nonuniformly mixed pollutants and the transactions costs can become very large. These costs serve to further reduce the cost savings from trades and therefore the incentive to trade, particularly when the potential savings are small.(Atkinson and Tietenberg 1991: 28) Source: excerpt from Sharon Beder, 'Trading the Earth: The politics behind tradeable pollution rights', Environmental Liability, 9(3), 2001, pp. 152-160.  |
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