One of the things I find hard to conceptualise about emissions control of greenhouse gases, in particular, carbon emissions, is how a carbon market will work to reduce emissions. By now lots of people have at least heard about the potential catastrophic events that may result from climate change or global warming, if we continue to emit carbon at our current rate. Somehow there has to be a cultural shift that would see emitting less carbon by using low energy efficient home appliances, driving electric or hybrid-electric vehicles with fewer emissions and so on.

I cannot understand why governments cannot just fix simple carbon tax systems that would hit businesses and homes almost immediately and instill a change in culture. I am sure the advocates of emissions trading, would have a thousand reasons as to why carbon tax systems would be an unfair i.e. difficult to apply fairly between different polluters. I would want to think though that none of the countries in the world have perfect taxation systems, which is why they are so complex, having been revised repeatedly by different governments attempting to achieve equity. Anyway, in trying to understand the workings of an emissions trading scheme and how it can be better than just a simple carbon tax, I did an extensive literature review which left me more confused than I was before.

Somehow, I am made to believe that with emissions trading, we are all learning from doing. Is that a good thing? How about a carbon tax in the interim, and learn about emissions trading by computer simulation, until such time when are confident to implement an emissions trading scheme that works. So rather than learning from doing, we minimise risk by learning from computer simulation, with carbon taxation as an interim measure. It might be that we may never move away from a carbon tax system, or we might have a mix of emissions trading and carbon taxation.

In fact look at this game, called Bulla Exchange®, (http://www.chameleonisland.co.nz/Household-Games/Bulla-Exchange/Carbon-Investments), that simulates emissions trading and is played over 7 days. On the website there is a calculator for options and futures contracts used by the players to assess their buying and selling potential for permits, driven by a carbon price that changes on a daily basis. The contracts can be written by the players in a mix that the players are comfortable with over a maturation period of anywhere between 1 – 7 days. There is a histogram of carbon prices on the Chameleon Island website that shows you the fortnightly fluctuations, with the daily updates. The game is initiated by issuance of permits through grandfathering, and a half hour card playing, between 2 players that gives the parties an opportunity to acquire better energy efficient technologies. After that its 7 days days wait whilst each player tries to either purchase/sell permits as their situation allows. The winner ends up with more money and enough permits to cover their pollution.

Maybe Chameleon Island should consider Bulla Exchange 2.0 with permit auctioning such that we can compare and see the difference it makes. Also more games on emissions trading would provide us with such an insight that may prevent us from committing to untested, and maybe seriously flawed systems that in the end would not achieve emissions reduction.

              

Tags: emissions trading