As plans to combat global warming develop, a group of banks and trading companies wish to establish a market for emissions credits, Reuters reports. Trading allows a power company emitting less pollution that it is allowed to sell the difference, or credit, to a company with high emissions. The latter can the use the purchased credit rather than cutting its emissions.
Trading is already taking place in the USA and Australia, and one-off deals are beginning to emerge in locations as far afield as Siberia, Costa Rica, Ontario and New South Wales.
The Kyoto conference in 1997 sketched out a blueprint for developed nations to cut their 1990 emissions of greenhouse gases by 5.2 per cent by 2010. This November, they will reassemble in Buenos Aires to try and develop this pact further, and draw in the developing countries. Some companies, like the Bankers Trust, Cantor Fitzgerald LP, Sumitomo Corp, Edision International Inc, and others, hope that the November conference will lead to a new business in emission credits worth billions of dollars over the next five years.
Advocates claim emissions trading will foster clean air measures in less developed countries which can profit by keeping below their quota, and selling the difference. The World Bank, London’s International Petroleum Exchange, the Sydney Exchange and the UN Industrial Development Organization are searching for a viable scheme.
Others have already started to act independently. Sandor’s Environmental Financial Products, for example, has invested $80 million in rain forest in Costa Rica. As the rain forest can absorb CO2, the company hopes to use it to sell credits. In addition, Japanese companies hope to earn domestic credits by helping Russian companies to cut emissions.
However, a workable system will depend on global agreement. Not all are in favour of credit trading. Some critics argue that the credit system is a way of allowing developed countries to avoid cutting emissions. They want to see every country meet the same target.