Environmental Engineering Reference
In-Depth Information
reduction at lower cost, or any combination of the three.
The reductions continue through future periods until the
goal is met. The system worked for SO
and the goal of
the program was met faster and at lower cost than origin-
ally expected.
The attractiveness of Cap and Trade is that the total
emissions are controlled and the emissions reductions are
known in advance (if the system works). The trading
option establishes a price for emissions and a market for
their trade just like any other commodity, and allows the
reductions to be made at the least cost. The problem is
that the cost of such a program is unknown at the begin-
ning, and will not be known until a market for allowances
develops and stabilizes. As you might suspect there are
other problems too, which I will get to after introducing
the emissions fee idea.
An emissions fee is simply an amount that has to be
paid to the government for every bit of CO
ethatis
emitted. In
Chapter
I showed how to set a fee for
power plant emissions by charging what it would cost to
capture and store the material, and came up with about
$
per tonne of CO
. There are other ways to arrive at
a number but the theory is that in a market economy,
if doing things the old way gets too expensive, you will
move to newer and less costly ways. In the Introduction
I called this tilting the playing
field to make the market
economy move in a desired direction by making it
possible to increase pro
ts by going in that desired
direction. The attraction is that such a system is very
simple to administer and is economically ef
cient.
The costs are known in advance, but in contrast to
Cap and Trade,
the emissions reductions are not
