Emissions Trading Scheme
It will be impossible to avoid dangerous climate change without achieving a major shift in the direction of investment, especially in the energy sector, both globally and domestically. By putting a price on carbon, so-called ‘cap and trade’ schemes should provide incentives for a shift away from carbon intensive investments such as coal-fired power stations towards lower carbon alternatives. However, in order for this to happen, the cap on emissions must be robust enough to keep the price of carbon sufficiently high.
Europe’s Emissions Trading Scheme, which began in 2005, sets a cap on emissions of more than 11,000 individual installations in the power and energy intensive industries (such as cement, steel and pulp and paper). If a participant exceeds its cap then it must purchase emission permits from another participant who has permits to sell. Fines are imposed if companies fail to comply with the scheme.
The scheme is currently being reviewed in Europe with a view to how it will operate beyond 2012. WWF has established itself as the lead NGO working to improve the environmental integrity of the scheme such that it really begins to drive low carbon investment within the EU.