Environmental Engineering Reference
In-Depth Information
PV
2000
PV
2030
Hydro
Wind
Onshore
Wind
Offshore
Geo-thermal
Solar
Thermal
Climate
change
0.86
0.48
0.11
0.09
0.08
0.33
0.11
Health
0.43
0.25
0.075
0.09
0.04
0.15
0.11
Material
damages
0.011 0.008 0.001
0.001
0.001
0.004
0.002
Agricultural
losses
0.006 0.004 0.001
0.002
0.0005
0.002
0.001
Sum
1.3
0.74
0.19
0.18
0.12
0.49
0.22
6.14 Buying and Selling Pollution
One way to deal with the external costs of energy production is to impose a tax on the
particular activity that produces those costs. Notable precedents are taxes on cigarettes
and alcohol, well known to affect health. A more complex approach involves trying to
trade pollution. 'Emissions trading,' or 'cap-and-trade', was one of the cornerstones of the
1997 Kyoto Treaty. It is a market-based mechanism to control air pollution by providing
economic incentives to reduce emissions of pollutants. A central authority (usually a
government or intergovernmental authority) sets a limit or cap on the amount of a pollutant
that may be emitted (e.g., one million tonnes of CO
2
per year). This cap is allocated or sold
to firms in the form of emissions permits which represent the right to emit or discharge a
specific volume of the pollutant.
The rationale behind this approach is that, since most manufacturing and conventional
energy industries cannot avoid pollution, this should be recognised by granting permits
equivalent to the emissions they expect to release in a given period of time. Since there is a
maximum cap imposed by the government, the total number of permits cannot exceed the
cap. Ifa company exceeds its allotted quota ofpollution, it must purchase additional credits
on an open market. Those companies who invest in filters and cleaner production methods
can then sell their 'spare' permits to the polluters. Faced with the choice of investing in
