Emissions Trading What is it?

Emissions Trading  a Government initiative to address climate change via a scheme to reduce greenhouse gas emissions

Climate Change and the Greenhouse Effect Main Greenhouse Gases: Carbon Dioxide Methane Nitrous Oxide

Emission; A substance discharged into the air How are excessive levels of greenhouse gas pollutants released into the atmosphere? Human activity is changing the atmosphere by generating pollutant emissions; what are some of them?

Global anthropogenic greenhouse gas emissions broken down into 8 different sectors for the year

Emissions Trading; How does it work? Targets companies that produce 25,000 tonnes or more of greenhouse gas emissions per year = 1,000 companies. In Australia, the Government is currently preparing to implement an emissions trading scheme; “Carbon Pollution Reduction Scheme” ‘PAY TO PULLUTE’ giving incentive to reduce emissions Invest in environmentally friendly energy technologies Total emissions allowed to emit each year is called a ‘cap’.

To regulate the scheme, the Government will auction a number of emission ‘permits’ up to, but not exceeding the cap. Regulation and Trading Companies will be required to purchase one permit for every one tonne of greenhouse gas emission they produce over a one year period; this will be monitored by the Government’s regulatory department At the end of each year companies relinquish their number of permits to the government. Permits will be available for trade on an emissions permit ‘market’. As companies dependent on fossil fuels compete for permits the price is pushed up. 1 tonne = 1 permit

For other companies it will be more cost effective for them to reduce their emissions rather than purchase permits at very high rates Allow the opportunity to sell spare permits they don’t use. Further investment into alternative energy technologies. Incentive to Decrease Pollution Whatever direction companies decide to take, they will be managing their emission rates within the total cap with the flexibility to do so at the lowest cost, whilst at the same time effectively contributing in efforts to address climate change.

Sells unused permits as more cost effective to reduce emissions Australia’s ‘Carbon Pollution Reduction Scheme’ Invests in alternative energies and reduces emissions Company A Company B Emission Permits Market Regulator monitors and verifies company emission rates Competes with other companies and pays high price for permits Chooses to Pay to Pollute rather than implement costly long- term organisational changes Operating within the capped amount of total emissions allowed CAP

Image references References Skinner, B.J., Porter, S.C., & Botkin, D.B. (1999). The Blue Planet: An Introduction to Earth System Science. Hoboken: John Wiley& Sons, Inc. Green Paper - Carbon Pollution Reduction Scheme July Retrieved August 20, 2008, from