Environmental Engineering Reference
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known in advance; you have to wait and see how
fast the market moves things.
Where to apply the constraint is an issue in either case.
In the jargon of the business, you can apply it upstream
(as near the source as possible), or downstream (as near
the user as possible). If it is coal, for example, upstream
means at the mine while downstream means at the power
plant. If it is oil, upstream means at the re
nery while
downstream means at the gas pump. This can get very
complicated. If it is applied upstream in Cap and Trade,
what do you do if the downstream user makes carbon
capture and storage work? You lowered the amount of
coal that can be sold at the mine, but the CCS-capable
user needs the coal and gets rid of emissions some other
way. It seems easier to solve these problems with an
emissions fee, but the problem exists for both solutions.
No one has
gured out how to make Cap and Trade
work for transportation, and the European Union, which
has a Cap and Trade system for electricity and some large
industrial processes, does not even include transportation,
saying it will rely on other measures to handle the
problem.
Cap and Trade seems to me to have another problem:
enriching the guilty and punishing the innocent. It is
much easier for an inef
cient producer to increase effi-
-
ciency than it is for one who is already ef
cient. Here is a
true-life example. Some years ago in one of California
s
periodic droughts, Stanford University, where I lived,
began to talk about water rationing for residents. My wife
is a conservationist so we already had low
'
flush toilets,
flow restrictors in the showers, drip irrigation, etc. Our
neighbors had none of these. If we had been required to
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