Monday, September 22, 2008

Understanding the New Carbon Economy

Last week, while world markets were tanking, I was attending a fascinating program, the GreenPowerConference on Carbon Markets. In my work at GreenMicrofinance I wanted to better understand this emerging scene - every microclient who obtains a loan to go renewable instead of remaining petroleum-dependent lowers her carbon emissions, so in theory that is a huge amount of carbon offsetting in aggregate, if not in each individual household.
The problem: the earth is overheating due to excessive carbon emissions caused by consuming fossil fuels. The solution, to reduce these carbon emissions, is global and massive, and while the US is late to the table, it is clear that even with footdragging politicians slowing the process, the United States business and environmental sectors, and even our state governments, are moving forward without them.
A presentation by Steven Fine of ICF International laid out the challenge elegantly for a non-techy person like me.

  1. How do you design and plan systems and projects when the cost of energy is not knowable? Look at how unpredictable prices for different energy sources have been in the last year or two. Oil went up $25 a barrel today. Wind energy is now considered cost effective. Solar prices are expected to come down. We are all flying blind here.
  2. The regulations and policies are not yet known. While it is assumed there will be a USA cap & trade system in place, the Western Climate Initiative states are initiating their own, a Northeast consortium of states are doing the same, RGGI, Regional Greenhouse Gas Initiative kicks into place on 1/1/09, and Kyoto itself expires in 2012.
  3. The technologies to accomplish the goals continue to develop, but most are not in place yet, like sequestration of coal emissions. Their price is also a complete unknown. I can add 2 more items to Fine's:
  4. This marketed and traded commodity, tons of carbon, is invisible to begin with and
  5. What is actually being produced is a negative - that invisible ton of carbon is actually NOT being created. So we are buying and selling an abstraction of an invisible substance. Tricky!
You see the problems. It's remarkable to me that so much has actually been accomplished; for example, despite a lot of grumbling about their slow and bureaucratic procedures, the UN's committee which approves projects for offsets, called CDM's, clean development mechanisms, has approved several 1000 projects, with thousands more in the pipeline.

photo from
Good Magazine

1 comment:

J2Callie said...

This proposed system will put a definite price on carbon, to help make business decisions more predictable:

Sightline's research team has put together a comprehensive primer on cap and trade designed for journalists, decisionmakers, and communications folks.

Download it here:

Based on extensive research and economic analysis, Sightline's Cap and Trade 101: A Climate Policy Primer sorts out the details of effective policy and answers the tough questions.

* The cap, the trade: How cap and trade works
* How to evaluate the efficiency, effectiveness, and fairness of a cap-and-trade system
* What about offsets?
* What happens to energy prices?
* Carbon tax vs. cap and trade?
* Auctioned vs. free pollution permits?
* How to build in protections for working families
* Four ways to make sure cap-and-trade funds go to local economies

We invite you to take a look, forward it to your contacts, and to get in touch with us if you have further questions for our research team.

Thank you,

Anna Fahey
Communications Strategist
Sightline Institute, Seattle

P.S. If you have trouble downloading the primer, you can also try this direct link to the pdf: