Name: Sherrill

Student No. 07590523

Can Current Carbon Trading Schemes Be Effective in Helping

Companies to Carry Out Socially Responsible Practices?

【Background】

Over last 100 years see a tendency of global warming as average global surface

temperature has risen by about 0.74℃. It is very likely that the rising level of carbon

dioxide in the atmosphere is the cause of climate change, according to the

Intergovernmental Panel on Climate Change. As fossil fuels may still remain the main
source of power in an increasingly energy-hungry world for decades to come, people
have taken some measures including constituting some carbon trading schemes in
order to tackle global warming.

【Analysis】

Cap-and-trade is one kind of scheme according to which carbon emissions are limited
and can be traded. Following ETS, which is the largest cap-and-trade mandatory
scheme, one of the involved companies Drax will undertake a project to reblade its
turbines and may cut the amount of CO2 generation by one million tonnes per year.
There are also voluntary cap-and-trade schemes such as CCX that hammer at CO2
emission reduction. Ford, which participated in this scheme, cut its CO2 emissions by
nearly 23 percent in 2003.

Another kind is called carbon emission offsetting scheme including CDM and JI, in
which companies can receive credits from compensation projects for emissions. There
are various ways for companies to offset emissions. For instance, Ambio, which has
carried out some afforestation and reforestation projects in southern Mexico, may help
to offset almost 30,000t CO2 over a 100 year period. Others such as renewable energy
development, energy conservation and financing emissions reduction projects in other
countries can also be used for carbon offsetting.

Though carbon trading schemes may have taken some positive steps to tackle human-
induced climate change, in practice, there are still a number of problems as it may not
be as efficient and reliable as people have expected. Some cap-and-trade schemes
such as ETS have capped improper amount of CO2 emissions that resulted in it was
cheaper for firms to buy spare permits than paying the fine or reducing their
emissions. In addition, due to offsets’ indirect nature, many of them may be difficult
to verify and may cause potential fraudulent competitions. Also, some projects such as
tree planting may just have temporary benefits instead of long-term influences.

Moreover, the benefits of carbon trading schemes may be severely limited since
participants are not comprehensive enough. The US, for instance, the world's largest
CO2 polluter, excluded itself from Kyoto protocol. China, which may probably exceed
the US in emissions by mid century, also has no obligation to reduce emissions.

【Conclusions】

With the tendency of global warming and the acceleration of energy demand,
companies may take measures to assume their corporate social responsibility of
reducing emissions. As carbon trading schemes have partly influenced the CO 2
emissions, it still needs further improvement. Tighter limits of cap-and-trade schemes
and practical carbon emission offsetting schemes may lead to more effective
procedures. Also, a broader range of participants may help to enlarge the influence of
emission reduction.