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Saturday, April 29, 2006


Just this afternoon, I finally got around to putting the TerraPass I bought a few months ago onto my car.

This is a very cool idea. You tell them what kind of car you have and how many miles per year you drive it. Then they sell you a TerraPass that offsets the carbon dioxide emissions from your car for one year. This is done by investing the cost of the passes in projects that reduce carbon dioxide emissions elsewhere, mostly renewable energy capacity. They calculate how many pounds of carbon emissions are eliminated based on your investment. It's a lot more affordable than you would think -- it cost me $30. My car is relatively efficient, and I don't drive much, but it's still relatively cheap even for people with more emissions.

Obviously, the calculations involved here are inexact. The more troublesome part is whether the carbon emission reductions your investment creates really wouldn't have happened without your money. I guess as an economic matter, every additional increment of investment expands a given industry. But every bit of money invested in, say, wind farms also has an effect on the decisions of others to invest. So that complicates things, but I can't imagine a scenario where TerraPass investment wouldn't decrease net overall carbon emissions. (Unless people feel less guilty about driving their cars as a result, and drive more -- but I don't think that's all that likely on a large scale.)


LJ said...

Well, you sold me--I bought one yesterday. There are some things* about it that make me raise an eyebrow skeptically, but hey, still better than nothing I suppose.

*(things like the fact that they're taking manure and turning into methane and then burning that methane to produce electricity, which is still producing CO2 (but it's better than the methane, and it's neutral because it's not carbon from fossil fuels, they say))

I've heard bits about this carbon trading, Chicago Carbon Exchange, Carbon Financial Instruments, etc stuff here and there. Do you know much about it, or where I might read? On one hand it seems like a great idea because it appeals to all the free-market cheerleaders who run the world (conservatives, business leaders, economists, etc) and who often frown on more direct limits on pollution. But on the other hand it seems weird and made-up like...well, like financial markets (a couple weeks ago I started reading about financial stuff on Wikipedia to try and understand how things like money production and bond trading work...and it's all made up! It's just gambling, plain and simple. Anyway...).

For example, one way that Terrapass says it works is by purchasing CFIs and other of these share-type-thingies, and then "retiring them from the market." How does that work? Can't the Exchange just issue more if people demand it?

But anyway, it's very interesting, and like I said better than nothing.

teague said...

Cool -- glad you bought one.

A quick note on the methane...capturing the methane and burning it to make electricity is greenhouse-efficient (if you can say that) even though CO2 is released because methane is 21 times more powerful as a greenhouse gas.

Anyway, financial markets are a bit of a mystery. (Which is why I was a bit disappointed when my advisor's response to my question yesterday about whether I should take macroeconomics in the fall was "No.") In regard to them being completely made up, yes, but that's what gives them such potential...they're of our creation, so they operate by whatever rules we make up for them, and if we don't like the outcomes (say, planet-pillaging capitalism), we can change the rules. We can try, for example, to include in the market some of the bad effects of certain business activities that otherwise don't appear on a balance sheet ("negative externalities," in econ-speak).

So, carbon trading is the first real effort on that front. The exchange is not allowed to create more carbon credits; that would not only fail to meet the environmental goals, but it would decrease the value of existing credits. When TerraPass says they "retire" credits, that means that they can literally take pollution that someone would have been "allowed" to produce out of the system. So it's actually really cool.

It seems like the main problem with carbon trading schemes is that you still need the political will to keep lowering the cap from which the credits are calculated. If you set a cap and then never change it, you don't make much progress.

Okay, hope that pedantic little rant was more helpful than annoying...

LJ said...

No, definitely more helpful. Hopefully that IETA website you linked to will help enlighten me, as soon as it stops crashing every other click.

So the number of credits that are on the market at any one time is based on gov't caps on overall pollution? And is participation in the exchange volutary, or mandatory for any entity producing a certain amount of greenhouse cases? (I should read that site more to see if it answers my questions, but that'll have to wait, I guess)

What you said about changing the rules is interesting to me, I'd never thought about it that way. I guess because things like the stock market seem like such powerful institutions that you don't hear or think about how they could be changed (or at least I don't).

And including negative effects into the market...so right now the stock market and the carbon market are seperate exchanges, although I assume many of the same companies are trading on both. Do you or someone else envision a more directly integrated market? Like where someone evaluating a companies stock says things like, "well, their earnings are up this quarter, but so are their emissions..."

I have so many questions about this kind of thing...

teague said...

Don't bother with that IETA site...it didn't look like it had much other useful info besides what I linked to.

Yeah, so the government or some sort of third-party entity set up the carbon/pollution trading market. The total amount of credits in the market is typically designated by government regulations. I think most schemes for industry allocate credits based on an emissions baseline set by the levels firms were producing around the time the scheme was started. Europe, under Kyoto, has just started a mandatory trading scheme, I believe. In the U.S., I think there's a voluntary trading scheme that covers certain industries/firms. (I think it's just individual firms opting in...as you can tell, I don't know a lot about it.)

The share price wouldn't include ecological concerns directly, but the separate market for that stuff would feed into the company's bottom line and thus into the share price. As far as "changing the rules," that's just my own riff on the free-market stuff. Taking economics last semester, there was this slow realization that it isn't economics per se that's callous and somewhat evil, just the very restrictive view of economics that practitioners have tended to take. The field has conceptualized a lot of effects of economic decisions that are reflected outside of balance sheets (like pollution on personal or planetary well-being, say), but hasn't had the will or the means to actually incorporate them in the everyday practice. Maybe now that technology is getting more sophisticated, and attitudes are changing, we will.

To that end, check this out. Basically, an emissions-trading scheme for individuals. Pretty awesome. It's apparently being batted around in Britain...shows how different the political debate is there, for one thing.

Also, the External Links section at the end of the Wikipedia carbon trading article seems somewhat useful.

What we really need is some professor-type person to sit down with us and explain it all, though...

LJ said...

Wow, there is *no way* a personal system like that could fly here. And it honestly creeps me out--considering how many things use electricy or gas at least indirectly, the government would literally be tracking your almost every move. I don't like that, and it's very depressing to me that the global warming situation has got to the point where measures like that might be what it takes to get us out.

An NYT piece the other day seems to say that the scientific community is now finally all in agreement that humans really are contributing to global warming -- yay, maybe now some more people in powerful places will get their heads out of the sand. But the article ends like this:

"Dr. Christy also said that even given what the models projected, it would be impossible to slow warming noticeably in the coming decades. Countries would be wise to seek ways to adapt to warming, he added, even as they seek new sources of energy that do not emit heat-trapping gases."

teague said...

Yeah, it seems the consensus is that we don't have much of a chance of stopping at least some serious consequences of climate change (as today's Post article on climate-change linked disease patterns shows). And of course, note that extremely convincing scientific evidence has yet to change the Bush Admin's position on what we should be doing.

Anyway, the big brother element of a personal carbon cap scheme is unnerving. I'm trying to think of a way you could do it without maintaining a central database. I'm not sure there's a way. You could do a "light" version that just keeps track of direct carbon consumption on an individual basis (i.e. usage of fossil fuels and carbon-generated electricity), with all firms producing products or providing services subject to caps of their own. The sum of all commercial and personal caps would be equal to the total emissions target for the country. The carbon-intensity of various products would be experienced by the public through prices. Seems like this might work reasonably well (if the implementation and enforcement nightmares could be worked out), and the only info the government would need on your individual life is how much gasoline, natural gas, electricity, etc. you buy.