Guest Lecture - Elizabeth Lokey from camco and author of "Renewable Energy Project Development Under the Clean Development Mechanism" (available from Amazon)
Introduction to Carbon Markets
source: http://www.elementmarkets.com/na_carbon_markets.html
- Ways to reduce carbon emissions – imposing standards, cap & trade, hybrid systems (of tax and cap & trade)
- Cap & Trade
- Point source emissions are easier to regulate than say, vehicles (which would probably need to be regulated at the fuel level)
- An industry would need to hold a permit for every metric ton of CO2. Allowances are either given or purchased (from an entity with extra) to meet the level of emissions. Over time, the cap is lowered
- Offsets
- Projects that exist outside of the cap. Provide reductions additional to a business as usual situation
- As an incentive for reduction of farming emissions, the reductions are quantified and sold onto the market as allowances
- Example: Instead of a standard open lagoon system to break down animal waste, using a digester to capture methane which can then be burned to create heat or generate electricity, or flared
- camco will cover the capital cost for a farm to install a digester in exchange for a portion of the offsets
- a farm with 3000 head of cattle can earn $1500/day from digester offsets
- Currently, there are several voluntary offset standards, but there is uncertainty about exactly what will be regulated in the future
- However, people are buying these now, hedging on the offset market, or for positive PR
methane digester
source: http://www.greenmeadowfarms.com/methane_digester.htm
- There are some issues to consider regarding carbon markets
- One is that renewable energy sources only benefit indirectly to the carbon market - a national renewable portfolio standard would best incentivize renewable use
- Another issue is avoiding “double counting” – not paying people to do something they may have already done anyway
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