Wednesday, February 21, 2007

Does emissions trading spur innovation or hinder it?

Same day, two different perspectives.

Gar Lipow at the Gristmill blog examines a number of trading schemes that have previously been hailed as successes and comes to the conclusion that they’re not all they’re cracked up to be:

Compare the success of the often-touted sulfur dioxide trading system the U.S., instituted in 1990, with the speed and quantity of reductions under rule-based systems during the same period. U.S. SO2 emissions dropped by 31% between 1990 and 2001. Over the same period of time, under old fashioned rule-based regulation, Germany reduced its emissions by 87%, Italy by 62%, and Western Europe as a whole by 57%.

In both absolute and per capita terms, Western Europe and the individual nations within it have less acid rain-producing pollution than the United States. This was not true when they began their regulatory programs in 1982.

…emission trading has a record of producing slower results than conventional regulation, with at least one example of complete failure to meet a goal. But doesn't the increased flexibility at least encourage innovation? The empirical record says no…

Meanwhile, an article (pdf) just published by Environmental Defense (a US-based environmental NGO) looks at these same schemes, as well as early results from the EU carbon emissions trading scheme, and comes to the opposite conclusion. (via Conservation Finance)

I haven’t compared the two articles in any detail, so I’ll leave it to you to be the judge!

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